Investing for high yield shares requires a lot of research and an active investing approach.
It requires an investigation into dividend stability, the underlying performance of the company and a judgement over any potential trade off between capital growth and high yield. If you're investing in high yield shares, you also need to consider whether your strategy is a short term trade to harvest income, or a longer term approach designed to lock in higher returns.
Here's a closer look at 3 high yield shares that will all go ex-dividend this week.
JB Hi-Fi Limited (ASX: JBH)
JB Hi-FI's share price spiked on 10 February on the back of an impressive H1 earnings report, pushing hard against headwinds in the retail sector. It announced net profit after tax (NPAT) increase of 6.6% to a record $170.6 million. This spike was followed by a 7% decline in share price over the past week to close at $41.40 on Monday.
The company's dividend will be 99 cents per share (cps), a yield of 2.4% on Monday's closing share price. So an investment of $1,000 at this price would produce a dividend of approximately $23.76. As JB Hi-Fi's shares are fully franked this also carries a tax credit of 42.4 cps. The company pays an interim and final dividend, which has averaged 3.2% over the past 12 months with the rising share price and 6.2% in FY2019.
JB Hi-Fi share price has endured a recent drop, however the company has delivered persistent strong results. Therefore, dividend investors may want to look deeper into this high yield share. JB Hi-Fi goes ex-dividend on Thursday 20 February.
Navigator Global Investments (ASX: NGI)
Navigator is the mid cap Australian holding company for US-based Lighthouse Investment Partners, LLC. It is a funds manager with a good track record of success. The company's share price has risen 11% in the week since February 10 to close at $3.55 per share on Monday.
Navigator's dividend will be 12.6 cps, which is a yield of 3.5% on Monday's closing price. So an investment of $1,000 would produce a dividend of $35.53. The Navigator dividend is not franked, so there are no tax credits associated with this payment.
Navigator pays an interim dividend and a final dividend with an average dividend yield over the past 12 months of 7.1%. Its history over the past 5 years shows that its share price decays a little after the ex-dividend date but quickly recovers. Navigator goes ex-dividend on 19 February.
Korvest Limited (ASX: KOR)
Korvest is an interesting small cap manufacturing company with a grab bag of industrial products, including hot dip galvanising, sheet metal fabrication, manufacture of support systems and fittings, and a range of other services and products.
Korvest's dividend will be 15 cps, which is a yield of 3.3% on Monday's share price of $4.60. Therefore, an investment of $1,000 at Korvest's Monday share price close would produce a dividend of $32.55. The 100% franking provides investors with a tax credit of 6.4 cps. Korvest goes ex-dividend on 20 February.
The Korvest share price has dipped slightly after each ex-dividend date over the past 5 years but regained value relatively quickly. However, the company's share price is currently at a 5 year high after being in the doldrums for the past 4 years.
Foolish takeaway
Knowledgeable dividend investors are always on the lookout for opportunities to purchase high yield shares at a reasonable price. For instance, your dividend strategy may be to purchase before the ex-dividend date to capture the income. Or it may be to purchase at a reduced share price after ex-dividend locking in a better return in the next round of dividend payments.
