5 high yielding consumer stocks to buy

The UK stock market has marked down significantly a number of UK consumer stocks as concerns over the current levels of consumer spending in the UK economy have intensified. These matters were made worse as a result of the ‘credit crunch’ and subsequent worries over the potential for falling house prices to impact further on consumer confidence.

The current valuations of some retail stocks indicate a market consensus that British consumers are going to have to pull in their spending and the good time for these retailers is over for now.

The Income Monkey suggests that the current falls are over done. Investors and savers that are focused on maximising their investment income might want to take a punt on these income stocks and the fact that their sales are sufficiently sustained to allow these household names to maintain their high dividends even during the coming leaner times. What the market may have missed in several cases is that what are perceived as largely UK focused businesses are increasingly deriving their revenue from abroad and therefore are as much as a play on globalisation as they are on the health of the UK economy. Read on for some domestic income & savings opportunities.

DSG International
This company owns the brands Dixons, Currys and PC World. The market is concerned that its core markets of electricals and PCs will be hit hard by any slowdown in consumer spending. The share price has fallen from a high this year of 220p to just above its year low of 117p. The result is a healthy projected yield of just under 8%. The downside is that the dividend is only just covered by income and therefore if trading worsens more than expected there is always a danger that it could be cut.

High 220.25p Low 116.6p CURRENT 117p
Projected yield 7.7%

Debenhams
Since floating at 200p in 2006 Debenhams the UK’s second biggest department store has disappointed the market and had slumped to a low of just under 90p earlier this year. It has now bounced a little after an up beat trading statement in recent days which showed that despite like for like sales decline overall profits rose because of new store openings. The yield is not as healthy as some with a projection of 6.4% for the year ending august 08. However, the dividend income should be relatively safe giving it is covered just under twice by projected earnings.

High 203.75p Low 89.5p CURRENT 112.25P
Projected yield 6.4%

Pendragon
Pendragon is the UK’s biggest car dealer. The company used to specialise in luxury brands such as Porsche and Ferrari but has recently moved into selling main stream models by Ford and Vauxhall. The share price has slumped from a high of 125p earlier this year to trade at a little over half this level although it now stands above its low. Valued at a little over £400m with sales of £5 billion the yield for the financial year ending December 07 its’ yield is 6.2% rising to a projected 7.2% for 08.

High 125.25p Low 55p CURRENT 63p
Projected Yield 6.2%

HMV Group
HMV is a music, video and book seller through its’ two retail concessions HMV & Waterstones. Its share price has been hit over the last few years by competition from internet rivals both for the sale of music and books as well as concerns over the state of UK consumer spending. The share price is down from a high this year of 171p. At the current price the stock is on a 6% yield with the dividend not fully covered by revenue. Analysts however expect revenues to recover during the next financial year ending April 09.

High 171p Low 104p CURRENT 121.5p
Projected Yield 6%

Kingfisher
Kingfisher is potentially one of the most interesting and heavily hit retail shares with its strong exposure to the UK housing market. Kingfisher owner of B & Q is synonymous with UK DIY. However what is not known by many investors is that half of it’s’ revenue are now generated internationally in France, Poland and China amongst other countries. Whilst the UK is turning down sales in many of its foreign markets are booming away. With its property portfolio having a valuation of over £3billion compared to its current market cap of just over £4 billion its share price is pretty well backed by tangible assets. As recently as June this year broker SG Cross Asset Research had a target price of 354p. Billionaire Warren Buffets Berkshire Hathaway has a stake in the business and to top it all; the current yield is a more than respectable 6.5% and is just covered by the projected earning to the end of January 08.

High 284p Low 164.8p CURRENT 173.1p
Projected yield 6.5%


THE INCOME MONKEY VERDICT

The Market is clearly pricing in a big slump in consumer spending over the next couple of years. There could be an opportunity for savers and investors seeking income to buy into high yielding stocks on the basis that expenditure does not slump by the degree expected and that these companies continue to pay a high and rising dividend income through to the next up turn in the consumer spending cycle.