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3 high-yield stocks for the conservative investor

As regular readers will know, I’m currently pursuing a strategy of buying a diverse group of undervalued small-caps, because this is the most appropriate course of action for a young person who will remain invested for many years.

However, such a strategy is not as attractive to investors with more than 50 years of life experience already under the belt. Those investors will want some of their investments to pay a generous and regular dividend.

Here are 3 high-dividend stocks from the top of my watch-list.

Mighty River Power Ltd (ASX: MYT) is a newly listed company that owns geothermal and hydro power plants in New Zealand. With a $3 billion market capitlisation, the company trades on a trailing yield of 5.7% – and this is expected to grow. However, the main risk facing Mighty River Power is that Rio Tinto Limited (ASX: RIO) might close its Tiwai Aluminium Smelter. I’ve considered simply accepting that risk, because the smelter “contributes $525 million to the Southland economy annually (10.5 per cent of Southland’s GDP) and supports more than 3,200 direct and indirect jobs in the region,” according to Rio Tinto.

But while it may seem unwise for the New Zealand government to allow the smelter to close, Rio Tinto has threatened to do just that, and plenty in politics are opposed to bailing the smelter out. Investors might want to avoid such a risk.

Prime Media Group Limited (ASX: PRT) owns television broadcasting licenses in regional NSW, the Gold Coast, Western Victoria and Western Australia. The majority of television programming is supplied through an affiliation agreement with the Seven Network which is owned by Seven West Media Ltd (ASX: SWM). That means that in large part Prime’s fate is dependent on Seven’s hard work.

At current prices shares are trading on a trailing yield of 6.8%, fully franked. Whether or not that dividend grows, I think it likely that shares will yield over 6% for the next few years at least. However, it’s hard to forecast how long free-to-air television will last in an environment where viewers increasingly access content over the internet, and I avoid it because it doesn’t fit my philosophy of tailwind investing.

Finally, for those interested in property, BWP Trust (ASX: BWP) is certainly worth a look. With a price to earnings ratio of 17.75, it certainly isn’t cheap, although investors can likely rely on its 5.6% dividend growing modestly over time. The company earns most of its profit from leasing property to Bunnings, the hardware business owned by Wesfarmers Ltd (ASX: WES). While there is always risk investing in property, my instinct is that some of the properties owned by the trust will eventually be worth a lot more than they are currently.

5 stocks under $5

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*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor Claude Walker (@claudedwalker) does not own shares in any of the companies mentioned in this article, but does have an indirect interest in Mighty River Power.

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