Interest rates have remained low throughout 2021. Even with the potential for rates to increase in coming months, it’s likely to only be by 0.15% or similar. Therefore, in 2022 it’s going to be still important for me to try and make my money work hard elsewhere. One way I can do this is via top dividend shares. The income yield that I pick up from these stocks can help me to have a return on my initial capital. Here are some stocks I like.
Some dividend shares from finance
If I had a pot of money to invest in dividend shares, I’d aim to split it up via a selection of stocks. This allows me to reduce my risk from just holding one company. It also allows me to mix up the yields. I can target some high yielding stocks but offset some of this risk by also choosing some more conservative options. When I average out the yields, I should be able to get a nice blend.
For some conservative options, I’d look to buy finance firms Brewin Dolphin and TP ICAP. Both have similar yields of around 4.3% at the moment. Although they both operate in the finance sector, the companies are quite different. Brewin Dolphin is an investment manager that primarily makes money from providing wealth management advice and by growing the assets held under management.
TP ICAP is a financial broker for banks and other institutions. It helps to facilitate large trades as a middleman, taking a small cut as commission. I like both companies because both should do well if we see the stock market become volatile. Also, these companies shouldn’t be particularly negatively impacted from higher interest rates, which is another plus.
In terms of risks, both these subsectors of finance are very competitive. Both wealth management and brokering have numerous companies competing for the same business. Either of these top dividend shares could lose market share easily if they take their foot off the gas.
Higher yields, but higher risks
When looking for some higher yields, the metal and mining space offers me plenty of options. In fact, the three highest dividend yields in the FTSE 100 at the moment are all from this area. All offer yields of 10% and above. However, these do come with high risks, hence why I’d use other stocks to try and diversify.
For example, Rio Tinto can be classified as a top dividend share with a yield of 10.92%. It’s been paying out generous amounts from the profits made recently. In half-year results, profit after tax rose 271% from the previous period to $12.3bn.
One risk here is that the commodity prices can pull the share price lower. Falling iron ore prices have hurt the Rio Tinto share price, which is down 13% over one year. This helps to boost the dividend yield, but arguably this isn’t a sustainable way of doing it.
Overall, I’m considering buying the top dividend shares mentioned now. By mixing up the types of stocks I go for, I should be able to diversify my risk but keep an attractive overall dividend yield.
Make no mistake… inflation is coming.
Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.
Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.
That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…
…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!
Best of all, we’re giving this report away completely FREE today!
- Here’s one of my best stocks to buy now!
- 1 top stock I’d buy and 1 I’d avoid with Omicron risks ahead
- 1 FTSE 100 stock that could outperform in 2022
- Here are 10 US stocks investors are betting against right now
- Aviva shares are up over 20% in 12 months! Here’s what I’m doing now
Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.