The three dividend shares I would buy today

Dividend shares are a great way to bring in extra income; here are my top three UK choices for income stocks right now.

| 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.

This year has generally not been a great one for dividend shares. Many of the best yield-paying FTSE 100 firms were forced to cut or suspend their payouts. However, as we head into 2021 with a vaccine being rolled out, things may be looking up.

What do I look for in dividend shares?

When choosing the best dividend shares, I consider a number of criteria. I want my capital to be safe, so I look for solid firms with good brands and good financial history. I want to have seen consistent dividend growth, though 2020 is a blip I can forgive. Then, of course, I want something that is yielding well right now. With that in mind, here are my top three UK choices right now.

BAE Systems

I have long been a fan of BAE Systems (LSE: BA), as the defence contractor has a good history of dividend payout. While the firm doesn’t make as many headlines as other companies, it has been a solid performer for many years.

Its future for the next few years also seems to have good prospects. Recently the German government approved the purchase of 38 Eurofighters, while the UK government has also announced its intention to increase defence spending.

At about 4.5%, BAE is not offering the highest yield available right now. However, I think it is one of the most stable. This alone makes it my top choice of UK dividend shares right now.

BP

BP (LSE: BP) is another one of my top dividend shares right now, and also one of my top picks for growth in the coming year. Though it cut its dividend earlier this year, at it current share price it is still yielding in the 8% range.

Oil prices have dominated BP’s share price for the most part this year. Covid-19 sparked a sell-off in a market that was already scared. With a vaccine and some bolstering moves from OPEC and Russia, I think crude should see some strength return in 2021.

Personally I think BP has been oversold for the most part because of Covid-19, and as this chapter draws to a close, the BP share price should bounce back to where it truly belongs.

GlaxoSmithKline

Last but not least of my choice of dividend shares is GlaxoSmithKline (LSE: GSK). Though I think Covid-19 vaccines will have little immediate benefits in terms of profits for Big Pharma, I think in the long run it will. An increase in both public interest and government spending on vaccines and pandemics should help the industry as a whole.

While there are pharmaceutical companies that I think have more growth potential, GSK is the clear choice for me, thanks to its almost 6% yield.

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.

Karl has shares in BAE Systems and BP. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 26%, can the BT share price really push higher still?

The BT share price has surged on several catalysts in 2024, but there’s evidence to suggest that the stock could…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

What are the best dividend shares to buy right now?

As shares in B&M European Value Retail have fallen, the dividend yield has reached a 10-year high. Should investors be…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

My favourite FTSE 100 passive income stock that keeps the Christmas coffers full

The holiday season is expensive and can leave many consumers struggling to make ends meet. Here’s how I use a…

Read more »

Investing Articles

The latest growth forecasts suggest the Glencore share price will hit 555p!

Harvey Jones has been disappointed by the performance of the Glencore share price since he bought the commodity stock last…

Read more »

Dividend Shares

A closer look at the 11% dividend yield forecast for Phoenix Group shares

Phoenix Group shares have one of the highest dividend yields in the FTSE 100 index today. Could this be a…

Read more »

Investing Articles

If I’d put £25,000 into the FTSE 350 at the start of 2024, here’s how much I’d have today!

Many FTSE shares have rebounded this year as interest rates look set to keep heading lower and market appetite for…

Read more »

Investing Articles

Up 40%, but experts forecast the easyJet share price could soon hit 664p! Time to buy?

The easyJet share price has been flying lately and stock analysts are predicting more fun to come. But there's only…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »