5 top UK stocks for dividend income

Dividend investing is a great route to grow passive income, you literally get paid for owning a share of a company. It’s a great strategy when thinking of financial freedom or when you want an additional income in retirement.

However, with the current crisis many companies have been forced to suspend or even cancel dividend payments. With lockdowns around the word eating into companies cash reserves it would be reasonable to wonder how dividends can be paid. In the second quarter of this year UK dividends collapsed by 57% and are projected to fall by at least two-fifths in 2020.

It is even thought that it could take until 2026 for dividends to return to their 2019 levels. As individual investors we need to take action to protect our precious dividends – so here are 5 top UK stocks that are still paying dividends.

Diageo (DGE)

As one of the world’s largest alcoholic drinks companies, the Diageo group owns a whole host of multi-billion dollar brands such as Guinness, Johnnie Walker and Smirnoff. With a dividend of 68.57p per share giving a respectable yield of 2.43% it is hard to go wrong with this one.

Granted Diageo has its challenges in this current economic climate with lockdowns forcing pubs and restaurants to close around the world. Despite this the company remained in profit for the first half of this year, albeit 51.8% down on the year previously. The company has, however, maintained its final dividend at 42.47p a share. This is a positive sign that it maintains solid cash flow despite challenges.

Legal & General (LGEN)

This is an investment firm, which managers £1.2 trillion of savers; and pensioners’ cash. Legal & General announced this week that it plans to still pay an interim dividend for 2020 of 4.93p per share. This is despite profits dropping 73% in the first half of this year to £285m.

This is exceptional when you compare to rivals Aviva who cancelled its 2019 final dividend. Additionally, the finance industry has been hit hard by dividend cancellations mostly under advice by the Bank of England and the Prudential Regulation Authority. At a current yield of 7.98% I would not ignore Legal & General’s dividend, however it will be interesting to see if they maintain it at this level in its final 2020 dividend next year.

Unilever (ULVR)

This consumer goods powerhouse produces a variety of household products and food bands such as Dove and Vaseline. Traditionally Unilever has been a great company to own during a downturn mainly due to how well diversified it is. Sales declined by only 3.1% in the second quarter of this year, but saw e-commerce grow by 49%.

Unilever is described as a non-cyclical consumer products company, which means that regardless of the economic climate people will still buy their products. This makes it a very safe bet, more so when you consider its 3.1% dividend at 142.76p a share as well as a pay-out ratio of 66%.

GlaxoSmithKline (GSK)

Shares in this pharmaceutical giant have increased by nearly 13% since their March low. It is one of the world largest producers of vaccines and personal health products. This potential places it in a good standing for involvement in any covid vaccine. Pre-tax profits in the second quarter of this year were £2.6bn, up from £1.3bn last year.

GSK has a dividend of 80p per share (5.1%) which it pays quarterly. This company offers a margin of safety similar to that of Unilever, it is highly defensive against economic forces as diseases don’t go away in a recession. With vaccine trials programmes expected to resume soon you would expect GSK to maintain its strong performance.

Tritax Big Box (BBOX)

Tritax Big Box is a REIT (Real Estate Investment Trust) dedicated to investing and funding the pre-let development of very large logistics facilities in the UK. REIT have been hit hard in this crisis as shops have not been able to pay their rents, but Tritax hasn’t had this problem.

Tritax is very well placed to benefit from the ongoing shift to online shopping with tenents including major retailers such as Amazon, Tesco and DHL. It’s hard to see this company not doing well in the future. It has a dividend of 6.85p a share giving a 4.4% yield

I own shares in all the above company with the exception of Tritax Big Box, however, it is very much on my watch list.

None of the content in this article should be considered financial advice, I am not a financial advisor and you should always do your own research prior to investing. These are my opinions only.

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