With £3,000 to invest, I’d spread the money between three of my top UK shares. And I’d diversify by size with one large-cap, one mid-cap and one small-cap. On top of that, I’d diversify by sector.
My large-cap pick
My pick from the big league is the smoking products maker British American Tobacco (LSE: BATS). The company has a market capitalisation of around £79bn and resides in the FTSE 100 index.
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The business deals in traditional smoking products and new-generation offerings aimed at reducing harmful health effects. And on 9 June, it delivered an upbeat trading statement. And that’s despite being in the process of withdrawing part of its operations from Russia because of the Ukraine war.
Chief executive Jack Bowles pointed to “strong” revenue and volume growth in all three of the firm’s new categories. But traditional smoking products continue to generate much of the firm’s incoming cash flow.
The company has an impressive multi-year record of growing its shareholder dividend. And it’s also buying back some of its own shares. However, it’s possible regulatory changes in the sector could lead to lower dividends in the future.
But with the share price near 3,564p the forward-looking dividend yield is forecast to be around 6.8% for 2023. I see that as attractive, although it’s always possible for any company to miss its estimates.
My mid-cap
My mid-range pick is international banking, investment and wealth management services provider Investec(LSE: INVP). The company has a market capitalisation of around £4.45bn and I can find it in the FTSE 250 index.
The business operates mainly in South Africa and the UK serving private clients with a range of products and services.
In May, the company delivered a robust set of full-year results. And chief executive Fani Titi said the company is well-positioned to serve its “carefully chosen” client base. And that’s despite the uncertain outlook due to ongoing inflationary pressures and the war in Ukraine.
I reckon uncertainty is what I get with all businesses. And shares have the potential to disappoint as well as to delight me. However, I’m keen on Investec’s chunky dividend and analysts’ estimates of decent growth in earnings ahead. Although estimates are never guaranteed figures.
With the share price near 462p, the forward-looking dividend yield is around 5.7% for the trading year to March 2023. And that tempts me.
And a promising small-cap
For my small-cap company, I’ve chosen Wynnstay (LSE: WYN), the UK-based manufacturer and supplier of agricultural products. It has a market capitalisation of around £128m and is in the FTSE AIM All-Share index.
In May, the company issued a strong trading update. And the directors said they expect full-year pre-tax profits to exceed previous expectations. That’s because the business benefits from higher fertiliser commodities prices. And, again, the effects of the war in Ukraine plus the disruption of supplies from Russia are combining to keep prices elevated. But that could reverse in the future.
Meanwhile, with the share price near 642p, the forward-looking dividend yield is near 2.6% for the trading year to October 2023. That’s not the highest yield of these companies. But I like Wynnstay’s long record of steady annual and rising dividend payments. The compound annual growth rate of the dividend is running at about 5.25%.
