Often people have a New Year’s resolution or goals they want to achieve in the upcoming year. This year, though, I have three stocks that I’m picking to produce above-average returns. This does not necessarily have to be in the year 2022 but I think that these are solid value picks that will do well over the long term. Oh, and these are dividend stocks as well, so they provide a steady stream of additional cash.
A gold mine of dividend yields
Earlier this year I wrote about how I am bullish on Rio Tinto (LSE: RIO). What I could not have anticipated at the time was that inflation would take off. Why is this relevant? Because high dividend-paying stocks have traditionally helped investors outpace inflation. For Rio Tinto, as of today, that dividend yield sits at an irresistible 10.12%.
As I said in my previous article, I think Rio is an excellent business. It has a great spread across minerals, which means that the cyclical nature of commodities often affects it less than industry rivals. Rio’s main risk right now is the volatility of iron ore prices. The industry is disproportionately tied to Chinese markets, which have seen several government-imposed restrictions this year and shifted prices. Rio is down 12% this year but I believe it can make a comeback in 2022. Its price-to-earnings is a dirt-cheap 5.65, which makes it a total win in my opinion.
A high-growth dividend stock
Over the past five years, Liontrust Asset Management (LSE: LIO) has simply been the gift that has kept on giving. Rarely do FTSE dividend stocks do so well over a long period of time. My concern here would be that Liontrust’s funds consist mainly of equities. The world’s equities markets have performed exceptionally well in recent years, fuelled in part by central bank interventions. However, what goes up must come down and if the crash that many are predicting materialises, that exposure to equities may come back to bite them. Fortunately for Liontrust, it is very well diversified across industries and markets, with exposure to bonds and other assets. I like that investors are pouring more and more cash into its funds and this could mean continued growth into 2022 and beyond.
The world’s largest bug slayer
With its acquisition of American rival Terminix this month, Rentokil (LSE: RTO) has become the world’s big cat (since, you know, cats catch mice) in the pest-control game. Globally, the industry is worth $22bn and is growing rapidly. This is especially the case in light of the pandemic, which seems to have made all of us a little more germ-conscious. A few weeks ago when the news broke that Rentokil was buying Terminix, the stock nose-dived 12% in a single day. I predicted that it would make a strong return and it is up 9% over the past week. Caution must be had as it remains to be seen whether competition authorities in the US will challenge the union of Rentokil and Terminix, but on the whole, I remain bullish on the long-term prospects here.
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Stephen Bhasera 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.