I’m taking a closer look at the investment potential of dividend stocks SSE PLC (LON:SSE) (SSE.L), National Grid plc (LON:NG) (NG.L), Centrica PLC (LON:CNA) (CNA.L) and Royal Mail PLC (LON:RMG) (RMG.L).
In my opinion, SSE’s 6%+ dividend yield makes it highly appealing at a time when inflation continues to move higher. I like the fact that the company is focused on growing dividends over the medium term, and this could enable it to offer an income return which at least matches inflation. With the company having a sound strategy, I think it has capital growth potential, too. Even if political risks from potential price caps remain high, I still think SSE could perform well in future.
Centrica also faces those same political risks. Higher inflation is causing politicians to become focused on the cost of living for individuals, and energy companies are once again in the spotlight. Centrica is moving further towards this space since it is selling off its oil and gas assets. At the same time it is hoping to reduce costs and become more efficient. This could allow for a higher dividend to make Centrica an even more appealing income choice for the long run.
National Grid continues to be one of my top dividend picks at the moment. I like its track record of dividend growth and feel it offers a relatively defensive outlook. While the FTSE 100 may move higher in the medium term, I think National Grid could provide a counterweight to what may be higher volatility in the short run. The potential for an interest rate rise could cause instability, which makes me more bullish on its defensive characteristics.
Like all the stocks mentioned here, Royal Mail faces the threat of nationalisation. The idea of nationalising certain companies and industries has gained traction in recent months as Labour has become more popular among voters. With the Royal Mail share price falling in 2017, I think the stock market has factored in higher risks for the business. Its 6%+ dividend yield and relatively low valuation make it an appealing investment with international growth potential in my eyes.