3 of my best ever dividend stocks: GlaxoSmithKline plc, Aviva plc and Royal Mail plc

These three stocks have superb income potential: GlaxoSmithKline plc (LON: GSK), Aviva plc (LON: AV) and Royal Mail plc (LON: RMG).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

However quickly interest rates rise, the yields on offer at the present time are hugely enticing by historical standards. In fact, it’s not just the yields that should be getting income-seeking investors excited, but also the prospects for rapid dividend rises. Here are three stocks that offer both of those attributes right now.

GlaxoSmithKline

With a yield of 5.6%, GlaxoSmithKline (LSE: GSK) remains one of the highest yielding stocks in the FTSE 100. While its dividends are set to flatline over the next couple of years as it seeks to strengthen its financial position and raise its dividend coverage ratio, in the long run GlaxoSmithKline seems likely to increase shareholder payouts at a generous rate.

A key reason for this is the company’s long-term earnings growth prospects. GlaxoSmithKline has one of the most impressive drug pipelines in the pharmaceutical business, with it being well-diversified as well as large so as to reduce the risk of disappointment from worse-than-expected drug trial performance. This means that GlaxoSmithKline is likely to raise dividends at a rapid rate in future years, which alongside a high yield and a diversified business model equates to a top-notch income play.

Aviva

Like GlaxoSmithKline, Aviva (LSE: AV) has an excellent yield that holds vast appeal even if interest rates rise at a brisk pace. Aviva currently yields 5.5% and while this is high, it’s likely to become even more enticing for the company’s investors as Aviva’s integration with Friends Life continues.

The combined company could dominate the life insurance market over the coming years and with the synergies from the deal, Aviva appears to be in a strong position to raise dividends over the medium term. In fact, as soon as next year Aviva is forecast to increase the amount it pays out to shareholders by 10.6% and such a rate of growth may not be surprising in future years too.

That’s because Aviva currently pays out just half of profit as a dividend and while some funds are required for reinvestment, Aviva could become more generous when it comes to dividends and boost shareholder payouts at a faster rate than profit growth.

Royal Mail

Royal Mail (LSE: RMG) continues to be a company of two halves. While its UK letters business is a rather disappointing division, its European segment is a growth driver that should allow the company to raise dividends in future years. As soon as next year Royal Mail is expected to increase shareholder payouts by 5.2% and even with that pace of rise the company’s payouts are still set to be covered 1.8 times by profit. This indicates that further growth is very much on the cards.

Allied to an upbeat dividend outlook is a yield of 4.3%, which is around 10% higher than the FTSE 100’s yield. And with Royal Mail having a price-to-earnings (P/E) ratio of just 12.5, it appears to offer excellent value for money as well as strong income potential.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Aviva, GlaxoSmithKline, and Royal Mail. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Investing £20,000 in this FTSE 250 stock today could net investors £1,944 in passive income this year

After falling 11% in a week, this FTSE 250 company is set to return almost 10% of the its market…

Read more »

Investing Articles

I asked ChatGPT to name the best S&P 500 growth stock and it picked this AI powerhouse

Muhammad Cheema asked ChatGPT to pick its top S&P 500 growth stock. He was disappointed with its response, which missed…

Read more »

Investing Articles

£10k in savings? Here’s how an investor could use that to target £420 of passive income a month

Harvey Jones shows how it’s possible to build a high and rising passive income from a portfolio of FTSE 100…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

Investing £5k in each of these 3 FTSE stocks in January 2023 would have created a £55k ISA!

Our writer highlights a trio of UK shares that have absolutely rocketed recently, boosting any ISA that held them along…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

£20,000 in savings? Here’s how it could pave the way to a £50,000 second income

Our writer shows how it is perfectly possible to build a very attractive second income investing regularly in the stock…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Investing Articles

3 ways an investor could target a near-£24k passive income from scratch

Looking for ways to build wealth for retirement from zero? Here are some tools investors can use to target a…

Read more »

Middle-aged black male working at home desk
Investing Articles

How much would a SIPP investor need to invest to earn a £1,000 monthly passive income?

With regular investment, UK investors have a great chance to build a large passive income with a Self-Invested Personal Pension…

Read more »

Investing Articles

£9k of savings? Here’s how an investor could aim to turn it into a second income of £560 a month

Christopher Ruane digs into the theory and numbers of how an investor could target a chunky monthly second income of…

Read more »