Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
Best Dividend Stocks for UK Investors (My Top 8 Picks!)
Ruby Layram
27th Nov 2024
Investing in the best dividend stocks is a popular way to build a portfolio that generates passive returns. These stocks pay out small shares of revenue to investors, providing an additional way to make money on top of capital gains.
In the UK, there are hundreds of dividend-paying stocks to choose from. However, not all of these stocks will generate the returns that you might hope for.
Whilst some dividend stocks can be a great addition to your portfolio, others come with significant risk or simply aren’t worth buying.
Creating a strong dividend portfolio is all about spotting those hidden gems that provide a high dividend yield with a relatively low risk.
So, what dividend stocks are worth buying in 2024?
The exact answer to this question will vary depending on your investing strategy and goals. For example, some investors might have a higher risk appetite than others which means that they might be able to invest in risky yet high-paying dividend shares.
On the other hand, investors who want to take less risk might be better suited to more stable dividend stocks that offer a slightly lower (but still generous) yield.
It’s all about knowing your strategy!
Nevertheless, finding the top dividend stocks in the current market is an interest shared by most investors. Therefore, I thought I would share my own top picks! Here are 8 UK dividend stocks that I am watching in May 2024.
A Bit of Helpful Info…
Before we jump into my top dividend picks, I thought it would be helpful to explain what a ‘dividend yield’ is – it will be mentioned quite a lot in this guide!
- Dividend yield: This is the number that tells you how much a company will pay in dividends each year. The number is a ratio that represents the percentage of a company’s share price that is paid as a dividend. Yields between 2% and 5% are considered strong and anything above 5% is considered high.
My Top 5 Dividend Stocks for 2024
I recently did a bit of a spring clean of my investment portfolio and came across some appealing dividend opportunities. Here are 5 dividend stocks that I am watching right now.
1. Coca-Cola
Coco-Cola HBC is a globally recognised brand that was established in 1892. Yahoo Finance has previously referred to the company as a ‘Dividend King’ due to the fact that Coco-Cola has raised its shareholder payout every year for at least 50 years. At the time of writing, the company has increased its payout for 62 years straight!
This means that Coca-Cola is a pretty safe bet when it comes to dividends. There is very little concern that the beverage giant will reduce or stop shareholder payouts any time soon.
Coco-Cola has a dividend yield of 3.01% – which places it in that strong category! While the company may not have the highest yield, it is certainly one of the most reliable.
2. GlaxoSmithKline (GSK)
If you’re interested in investing in innovative technology and pharmaceuticals, GSK plc might be worth adding to your watch list.
The Biopharma company was founded in the UK with a mission to get ahead of disease. The company is at the forefront of preventative vaccines and medicines that combat diseases such as HIV.
The company has a dividend yield of 3.2% and a stock price of around £33- which is pretty affordable! GSK is currently on a positive trajectory and expects earnings to continue going up. Moreover, there is a steady demand for vaccines and medicines which means that the company should be able to sustain a good performance year-round.
3. Lloyds Banking Group
Lloyds Banking Group is one of the high-yield dividend stocks that I’m watching this year. The company has a dividend yield of 5.54% and pays around 52.57% of its profits to shareholders each year.
Lloyds is considered to be a sustainable dividend-paying stock because the banking provider receives regular payments from loan customers which support the payment of dividends. The stock could be a suitable option for investors who want a high yield with relatively low volatility.
4. Pheonix Group
This is another one for investors who are interested in high yields. Pheonix Group currently offers one of the highest dividend yields at 10.6%!
More often than not, companies that offer such high payouts can be a bit risky. However, Pheonix Group is considered to be a relatively stable investment option (although all investments come with risk!). The company has a robust balance sheet which means that it can comfortably support its impressive dividend yield.
Pheonix Group is an investment services company that provides solutions for workplace pension schemes. The company was founded in 1857 and has a long history of positive market performance.
5. National Grid
Last but not least, National Grid is another UK dividend stock that I have on my watch list.
This stock pays an annual dividend yield of 5.55% and the payout records are fairly solid. The National Grid is a regulated utility which means that it is pretty reliable as an investment.
Furthermore, there is no denying that demand for power in the UK isn’t going anywhere! However, it is important to understand that there is never any guarantee that the value of an investment will go up.
6. British American Tobacco
With a dividend yield of 8.79%, British American Tobacco continues to appeal to income-focused investors.
Despite challenges in its traditional cigarette market, the company is pushing into next-generation vaping products, projecting robust cash flow over the next five years.
7. Aviva
Offering a yield of 7.34%, Aviva benefits from its streamlined operations and strong performance in Wealth & Retirement services.
Recent dividend increases reflect solid financial health, and its yield is forecasted to grow to 7.6% over the next year.
8. HSBC Holdings
HSBC provides a yield of 6.79%, backed by strong Q3 results with increased profits and revenues.
Although geopolitical tensions and interest rate fluctuations present challenges, its consistent dividend performance and potential future growth make it a reliable choice
How To Invest in Dividend Stocks Safely
Dividend stocks can seem like an exciting investment opportunity for investors who want to generate passive income. However, it is important to be aware that investing in dividend shares (just like any shares) comes with risk! Here are some top tips for reducing the risks that are involved with buying dividend stocks.
Don’t be fooled by high yields!
It can be tempting to fill your portfolio with high-yield dividends that promise excellent returns. However, high yields often come with high risk!
In some cases, it is not sustainable for a company to pay high dividend yields. If the company suddenly falls into financial trouble, it may have to reduce the yield or cut it completely.
It is sometimes better to focus on companies that offer an average yield and more stability.
Diversify
If you’ve been a Magpie reader for some time, you will have definitely heard us preaching the importance of diversification before.
Diversifying your portfolio is one of the best ways to reduce risk. It involves spreading your investments across different assets, instead of putting all of your money into one company.
Consider investing in a basket of different different stocks in different industries.
There are a number of good dividend stock opportunities for UK investors in 2024. In this post, I have shared my top 5 picks that seem to be pretty sustainable right now. However, it is important to understand that market conditions can change and companies may not always be able to pay the dividends that they advertize. For this reason, you should do your own research into the company before making any decisions.
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Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
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