I am always looking for dividend shares to buy for my portfolio. I am particularly interested in high-yield stocks, especially in today’s interest rate environment.
As such, here are three dividend shares offering an average dividend yield of 10% that I would buy for my portfolio today.
Dividend shares for income
The first company on my list is the hydrocarbon group Diversified Energy (LSE: DEC).
The organisation is focusing on producing high levels of cash flow from its gas wells in North America. It hedges most of its production, so cash flows are relatively predictable. These cash flows can support the company’s attractive dividend payout to investors.
At the time of writing, the stock supports a dividend yield of 11.1%, one of the highest payouts in the FTSE All-Share Index.
While the company does look incredibly attractive on many different metrics, a handful of risks may hurt margins. For example, it is having to spend additional cash meeting sustainability targets, and climate change regulations could continue to prove a headache for the enterprise.
Gold mining company Centamin (LSE: CEY) also has exposure to climate change risks. The mining industry is notorious for having a poor environmental record.
Overcoming this record will be a significant challenge for operators during the next few years. It could lead to increased costs and additional regulations, which would almost certainly impact profit margins.
Still, I think Centamin is well prepared. The company’s balance sheet is stuffed full of cash and gold bullion, and it is planning to ramp up annual output to 500,000 oz per year over the next five years.
Profits and cash generated from this additional output should support the group’s dividend. It has an excellent track record for returning excess cash to investors.
The stock currently supports a dividend yield of 13%, although analysts believe this will drop to 8% next year. Higher capital spending requirements could impact overall cash generation, but the firm’s outlook also depends, to a certain extent, on gold prices.
Asset management income
The final company I would acquire for my portfolio of dividend shares is the asset management group M&G (LSE: MNG). At the time of writing, the stock supports a dividend yield of 9.3%.
Asset management can be a highly lucrative business, especially when markets are buoyant. Indeed, M&G has been able to take advantage of the market environment over the past decade to grow its market share and expand profitability.
Management is now looking to grow further with bolt-on acquisitions. The group recently acquired Sandringham Financial Partners, a provider of independent financial advice with 180 partners and 10,000 clients.
I think more deals could be on the cards as we advance. These will help the company build out its wealth management business, increase visibility, and achieve operating economies of scale. Ultimately, this could lead to a bigger dividend.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has 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.