Prime brokers are shopping for these dividend shares! I plan to snap them up whereas the yields are nonetheless excessive

With the FTSE 100 index not too long ago reaching the best ranges it’s ever been, dividend yields might begin falling quickly. However for now, many stay sky-high.

This may very well be a chance to make a killing investing in shares that pay excessive dividends and that haven’t but seen their share costs exploding. Who is aware of when their yields can be this excessive once more?

Nonetheless, leaping into any previous shares may very well be like leaping into a worth entice. If the share worth falls greater than the yield pays out, it’s a waste of time. So I’m in search of dividend shares which were tipped by high brokers to purchase or outperform.

BT Group

Regardless of a subdued earnings report final week, confidence within the UK’s principal telecoms supplier is greater than I’ve seen in months. Each Berenberg and HSBC put in a Purchase advice on BT Group (LSE:BT) final Friday. This follows comparable optimistic rankings by Deutsche Financial institution in early Might and JP Morgan in April.

The share worth jumped 19% on the information, recovering the 18% losses incurred because the yr started. However there’s nonetheless some strategy to go — at 132p, the worth stays down 16% from final yr’s excessive of 158p. Perhaps that’s comprehensible as BT’s earnings have been declining at a median annual price of 6.5%, resulting in lowered revenue margins of 4.1% in comparison with 9.2% final yr.

However issues could be wanting up.

I’ve held shares in BT Group for some time and solely now they’re lastly delivering some gentle returns. For the primary time, I’m hopeful the 6% dividend yield gained’t be swallowed by losses. Some forecasts predict earnings development of 15% per yr, with discounted money circulation evaluation estimating the shares to be undervalued by 72%.

If that’s right, it might contemplating the shares whereas they’re nonetheless low-cost.

NatWest Group

NatWest Group (LSE: NWG) has had an incredible yr to this point, with the shares up 48% year-to-date (YTD). The UK Authorities not too long ago lowered its stake within the group to beneath 30%, prompting a £110m funding from US agency Capital Group. Till now, it had prevented NatWest because of the authorities’s 58% controlling stake following a bailout after the 2008 monetary disaster.

However analysts stay sceptical. 

On common, they predict earnings will decline at a price of two.4% per yr, with earnings per share (EPS) anticipated to fall to round 38p by 2025. If the price-to-earnings (P/E) ratio rises above the trade common of seven.8, the shares might take a success. However with the fast and risky worth development over the previous yr, a short-term correction wouldn’t be all that shocking.

Nonetheless, Deutsche Financial institution and Barclays put in Purchase rankings for NatWest Group earlier this month, which supplies me confidence. Not lengthy after, the group introduced the repurchase of extra shares as a part of a £300m buyback programme. 

With income, EPS and internet earnings all up from final yr, I believe analysts are too harsh on the financial institution. And with a 5.3% dividend yield that’s anticipated to rise to six% within the subsequent three years, what’s to not like?

In reality, NatWest Group is only one of three dividend shares I plan so as to add to my portfolio subsequent month, with the opposite two being Metropolis of London Funding Group and Unilever.