Many leading UK companies reward their shareholders by paying a dividend on a regular basis. This has often been a great way for traders to enhance their portfolios.
This article unveils the best dividend-paying stocks in the UK. Dividends are paid on a per share basis, generally in cash. You can either reinvest that cash into the company, plough it into a different equity or withdraw it. Read on to learn more about the top dividend stocks UK investors need to know about.
We used consensus analysts’ forecasts when putting together this top dividend stocks UK guide, and M&G came out on top. M&G initially stood for Municipal & General Securities Company Ltd. It launched the first ever UK unit trust in 1931, and it remains an international leader in savings and investments to this day, with more than five million customers.
M&G is a fairly new addition to the FTSE 100. It registered on the London Stock Exchange in 2019, following a demerger from its parent company, Prudential. It began paying dividends in 2020, and quickly soared to the very top of the high-yielding list. Analysts anticipate a 10% dividend yield this year, with 2,09 x dividend cover and a payout ratio of 48%.
The firm allows private investors to buy into funds through ISAs, savings plans, OEICs or unit trusts. It also provides financial services for professional investors, institutional investors and charities, and offers many other services. In 2020, it tied up a deal to acquire digital wealth management platform Ascentric from Royal London, which was expected to transfer £14 billion in assets under management.
M&G paid a dividend of 11.92p per share in May 2020, and then 6p per share in September. That amounted to a total of 17.92p of dividends, with a share price of 185p at the time, giving it a dividend yield of 9.68%. Analysts expect it to be slightly higher in future. The best broker accounts for beginners will allow you to buy M&G shares.
This British multinational tobacco and logistics company came in at number two in the consensus analysts’ forecasts, with a dividend yield of 9.3%. Dividend cover is expected to be 1.85x and there is a 54% payout ratio.
Imperial Brands, formerly known as Imperial Tobacco, owns brands including Davidoff, West, Gauloises Blondes, Montecristo, Golden Virginia, Drum and Rizla. The firm has 27,500 employees and operates across 120 markets, with revenue of £32.6 billion in 2020.
That makes it the world’s fourth largest tobacco company, behind Philip Morris International, British American Tobacco and Japan Tobacco. The firm produces more than 320 billion cigarettes per year, but is slowly transitioning towards vapour products, such as its Blu brand, plus heated tobacco and or nicotine products.
Imperial Tobacco is based in Bristol. It had a dividend yield of 11% in 2019 and 9.84% in 2020. Analysts anticipate a dividend yield of 9.3% this year, which makes it one of the top dividend paying stocks in the UK.
This Anglo-Russian precious metals mining company is registered in St Helier, Jersey, and trades on the London Stock Exchange. It owns a high-quality portfolio of gold, silver and copper mines, which makes it an interesting investment opportunity right now.
Copper prices have soared in recent months, as electricity generation, transmission infrastructure, energy storage, and consumption all require copper. It will play a vital role in the push towards green energy, but inventories are low, so the narrative is bullish.
Gold is widely seen as an inflation hedge at a time of rampant money printing by central banks. Silver is also an inflation hedge, but it has a practical use too. Mining companies are increasingly gaining attention from investors due to sustained growth of industrial activity and the desire for stores of value.
Polymetal employs around 2,000 people and has operations across Russia. It owns mines and carries out exploration regions in six Russian regions, plus Kazakhstan and Armenia. Polymetal is renowned for its attractive dividends, and analysts forecast an 8.4% dividend yield.
BAT is another tobacco giant, with brands including Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans. It is the second largest tobacco company in the world, but it is close in size to market leader Philip Morris.
The firm reported revenue of £25.8 billion for 2020, with net income of £6.6 billion. It has operations in around 180 countries, and employs 55,000 people. It was formed all the way back in 1902. Jack Bowles is the chief executive, having taken over from Nicandro Durante in March 2011.
BAT has long been one of the top dividend paying stocks in the UK. It has an anticipated dividend yield of 8.4%, with a payout ratio of 65% and 1.53x dividend cover.
This mining giant hit headlines in February 2021 after revealing that it would pay out the biggest dividend in its 148-year history. Rio Tinto said it would pay a final dividend of $5 billion and a special dividend of $1.5 billion, bringing its total 2020 shareholder payout to $9 billion (£6.5 billion).
The world’s top iron ore producer had just reported its best annual earnings since 2011, and rewarded its shareholders with a record dividend. It came after strong Chinese demand for iron ore sent the metal to a nine-year high.
The analysts’ consensus future dividend yield stood at 7.7% for Rio Tinto, with 1.11 x dividend cover and a 90% payout ratio. Rio Tinto has cleaned up its balance sheet and significantly reduced its debts in recent years, and it hopes to benefit from rising commodity prices in the years ahead.
This Anglo-Australian multinational is the world’s second largest metals and mining corporation, producing copper, gold, uranium and diamonds alongside iron ore. It is dual listed on the London Stock Exchange and the Australian Stock Exchange, with headquarters in London and Melbourne and around 45,000 employees around the world.
This British house building company is named after a horse that won the Derby and the St. Leger for the Prince of Wales back in 1896. It has come a long way since Duncan Davidson founded it in York in the 1970s, and it is now a constituent of the FTSE 100 Index.
Over the years, Persimmon has acquired Ideal Homes, Beazer Homes UK, Westbury and other rivals. It is now a major player in the UK housebuilding industry, and it is also known for its attractive dividends, making it one of the more attractive stocks out there.
The consensus dividend yield this year is 7.4%. with 1.16 x dividend cover and an 86% payout ratio. The firm boasts a strong cash balance and operates in a market that can count upon government support, so it could continue paying appealing dividends in future.
No list of the top dividend paying stocks would be complete without Legal & General. This financial services company provides pensions, annuities, investments and lifetime mortgages to more than 10 million clients across the globe.
Legal & General is the second largest institutional investment management firm in Europe after BlackRock. It was founded in June 1836 in a coffee shop on Chancery Lane, London. It is still based in the city, but it has operations in the United States, the Middle East, Europe and Asia too.
The firm’s turnover was more than £66 billion in 2019. Its expected dividend yield is 7/1%, with 2.28 x dividend cover and a 64% payout ratio. Legal & General has been paying consistent dividends for many years to its investors, so it is easy to see why it is regularly recommended as one of the best dividend stocks to buy now.
Phoenix Group is always mentioned in lists of the best dividend stocks UK. It is one of the country’s largest life insurance providers, with expertise in the acquisition and management of life insurance and pension funds.
It was created as The Pearl Loan Company in 1857. It has snapped up companies including Standard Life Assurance and ReAssure Group over the past few years.
The best dividend stocks consistently offer high yields, and that is certainly the case with Phoenix Group. It has been steadily increasing its dividends since 2010, and the forecast is 6.9% for the year ahead.
This blue-chip insurance provider is one of the top dividend paying stocks in the UK. It is a global powerhouse, with around 33 million customers spread across 16 countries.
Aviva is the market leader in the UK, and the second largest insurer in Canada, while it also has traditionally had a strong focus on growth markets in Europe and Asia. However, it has been selling off parts of the business to ensure it has a sharper focus on the UK, Ireland and Canada.
Amanda Blanc took over as chief executive in 2020, and the firm has made considerable progress during her tenure. Debts have been brought down, subsidiaries have been sold, and shareholders are looking forward to a special dividend after payout cuts during the Covid-19 pandemic.
The consensus dividend yield is 6.8% from this streamlined company. It may have cut dividends in the past, but a sense of optimism now abounds among shareholders, making it one of the top dividend stocks UK investors are considering.
BP has benefited from a surge in oil prices in recent months. It cut dividends in 2020 after the pandemic brought demand for oil crashing down, but the price started to pick up after the global economy reopened.
The company has been trying to rebuild its tattered reputation after the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. It now has renewable energy interests in biofuels, wind power, smart grid and solar technology alongside its core oil and gas exploration, production, refining and distribution business. BP has set a goal to cut its greenhouse gas emissions to net-zero by 2050.
BP is a London-based multinational with more than 70,000 employees. The company is poised to resume dividend payouts, with an analyst consensus forecast of 6.6%, dividend cover of 1.1 x and a 91% payout ratio, so it could reclaim its status as one of the best dividend stocks in the UK.
Dividend stocks like BP are normally long-term investments, but you can also check out our crypto trading beginners guide, daytrading guide and learn what is CFD if you are seeking a shorter-term alternative.
There are many more top dividend paying stocks to consider when putting together a diversified portfolio. Evraz is among the best dividend stocks in recent years. It has only offered dividends since 2017, and its total liabilities are high, but it has an annual yield of 8.5%, and pays dividends twice a year.
That could be appealing for investors seeking the top dividend stocks UK. Chelsea FC owner Roman Abramovich is the majority owner of Evraz, which is headquartered in London and has steel and mining operations in Russia, Ukraine, Kazakhstan, Italy, Czech Republic, the United States, Canada and South Africa.
The firm had net income of $858 million in 2020, so it is easy to see why Abramovich can afford to bankroll some of Chelsea’s lavish spending sprees in the transfer market.
Standard Life Aberdeen is another interesting option for anyone seeking the best dividend stocks in the UK. This Edinburgh-based firm is the largest active asset manager in the UK, handling equities, multi-asset, fixed income, real estate and private markets.
The company was founded in 1825 as the Standard Life Assurance Company, and it had offices in Canada, India, China and Uruguay during the 19th century. It is now known as Standard Life Aberdeen and it remains a major global player, having made several high-profile acquisitions over the years.
The firm’s dividend rate has increased steadily since 2007 and the yield is currently close to 7%, but it is operating at a loss, which adds an element of risk for investors.
Telecom giant Vodafone may have seen its annual revenues and earnings decline in recent years, but it still pays an attractive 6.3% dividend yield, so it deserves a mention when discussing the top dividend stocks UK investors should check out. Vodafone is based in Newbury, Berkshire, and has operations in 22 countries, with partner networks in a further 48 countries. It is a constituent of the FTSE 100.
Pharmaceutical powerhouse GlaxoSmithKline is another blue chip UK stock with a high dividend yield. It currently stands at 5.8%, so it is not quite at the same levels as the top dividend paying stocks mentioned above, but it is still above average. GSK is also the fourth largest firm in the FTSE 100, so it offers more stability to investors than some of the other top dividend paying stocks.
The top dividend paying stocks in the UK are highly appealing to investors due to the steady stream of returns they can expect to enjoy. However, it is also important to invest in companies with reasonably strong growth potential. If you can invest in dividend paying stocks whose price also rises in line with or ahead of the increasing cost of living, you have cracked it. You should therefore conduct research into the top dividend paying stocks’ chances of future share price growth, and buy shares in companies that blend high dividend yields with a strong potential for growth.
Looking for the best dividend stocks? The top dividend paying stocks in the UK include M&G, Imperial Brands, Polymetal, British American Tobacco and mining giant Rio Tinto. Anyone seeking the best dividend stocks UK can also check out Persimmon, Legal & General, Phoenix Group, Aviva and BP, while Evraz, Standard Life Aberdeen, Vodafone and GlaxoSmithKline are all forecasted to pay high dividend yields. To compare the payouts from these top stocks, be sure to take a look at our stocks trading guides at TradersBest.
Some people have been able to build up such strong investment portfolios that they are able to live off the dividends paid out. You need a substantial number of shares in high dividend paying stocks in order to enjoy a large enough income. However, the dividend changes each year, so it is not the most stable of incomes.To see how you can start buying top dividend stocks UK, take a look at our trading guides at TradersBest.
Searching for the top dividend stocks UK? Rio Tinto has made some high-profile dividend payments in recent years after benefitting from the increase in iron ore prices. It is one of the top dividend paying stocks in the UK, and it could benefit in future from rising commodities prices. To see how Rio Tinto could benefit you, be sure to check out our trading guides.
Coca Cola pays a reliable dividend that yields around 3% per year, so it is a popular option among international investors looking for dependable dividend paying stocks. Coca Cola normally pays four dividends per year, in April, July, October and December. The company has diversified into healthier drinks in recent years, and it also owns the Costa coffee chain, which has helped it grow revenues as consumer tastes evolve. Curious about how you can invest in Coca Cola? Consult our expert guides here at TradersBest.
Trading financial products carries a high risk to your capital, especially trading leverage products such as CFDs. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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