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the FTSE 100 indexThe company’s performance at the beginning of 2023 was very impressive. But despite these gains, many FTSE stocks continue to offer impressive dividend returns.
These three offer returns for example that are comfortably above the UK blue-chip average of 3.5%. But are they great stocks to buy, or are they just investment traps?
J Sainsbury
Sainsbury’s (LSE:SBRY) Stocks seem to pack a real punch when it comes to dividend payments. In addition to beating the average return of Footsie, it also exceeds the average return of its competitor in the industry Tesco. The former carries a meaty yield of 4.6%, compared to a yield of 4.2%.
As a potential investor, I am encouraged by the progress Sainsbury’s is making with its online operations. But problems elsewhere make it a risky investment, in my opinion.
The company is locked in a bloody price war that is decimating its margins. Its core operating margin collapsed nearly half a percent to 2.95 percent between April and September due to price pressures and rising inflation.
Intensifying competition both online and in-store means that profit-cutting price cuts must continue, too. Aldi announced this week that it will create 6,000 new jobs in 2023 as part of its store expansion programme.
Barat developments
The share price of housing construction is like Barat developments (LSE: BDEV) has been rising steadily since the fall. It indicates that investors believe the gloomy trading environment is more than just built into their valuations.
But the danger is not over for them yet. If inflation remains stable, interest rates may have to stay higher for a longer period. This will keep the homebuyer’s affordability under severe stress.
But recent good news from Barratt suggests it’s time to consider adding my property. She said earlier this month that “Bookings have shown a modest uptick since the beginning of JanuaryThanks to improved forecasts for interest rates, energy prices and a competitive mortgage market.
Today, Barratt shares carry an impressive yield of 7.2%. Poor earnings coverage and an uncertain market outlook remain a concern for me as an investor. However, if the trading news continues to impress, I will be looking for more of this cheap FTSE 100 index for my portfolio.
HSBC Holdings
I believe HSBC Holdings (LSE: HSBA) can be another great way to earn passive income. The dividend yield here is a whopping 7.3% for 2023.
China’s ongoing battle against Covid-19 poses some near-term risks. But over a longer period of time, I would expect earnings to rise here as demand for financial products rises across fast-growing Asia.
Standard CharteredThe bullish outlook last week underscores the region’s exceptional potential. He expected the return on tangible equity to rise to 10% this year, from 8% in 2022. The Asia-focused bank raised its target from 10% to 11% for next year.
HSBC has the brand recognition and scale to fully exploit this growing market. It is investing $6 billion in key regional markets such as China and Hong Kong to reap profits for an additional boost. If I had cash to spare“I will be seeking to buy FTSE Bank for my portfolio.
