Every month, we ask our freelance writer investors to share their top ideas for dividend stocks to buy with you — here’s what they said for October!
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Urban Logistics REIT
What it does: Urban Logistics REIT owns and operates more than 100 warehouses single-occupant designed for ‘last mile’ delivery.
By Royston Wild. Recent panic selling of UK assets has pushed prices of many top property stocks sharply lower. As a result, I believe Urban Logistics REIT (LSE: SHED) is an attractive buy for investors this November.
At current prices, the FTSE 250 firm’s dividend yields for the next two financial years sit at an enormous 6.1% and 6.5% respectively.
Property shares often provide investors with solid protection against high inflation. This is because they are usually able to raise rents in order to eliminate (or at least offset) increasing cost pressures.
With UK inflation at 40-year highs and tipped to go higher, Urban Logistics could therefore be an effective wealth preserver.
I wouldn’t just buy this REIT for the here and now, however. I’m expecting earnings (and consequently dividends) to grow strongly over the next decade as e-commerce steadily expands.
Demand for the warehouses and distribution properties it owns appear on course to improve rapidly. And rents will likely stride higher given the weak construction outlook for this particular sector.
Royston Wild does not own shares in Urban Logistics REIT.
LondonMetric Property
What it does: LondonMetric property is an urban logistics real estate manager with 17 million square feet in its asset portfolio.
By Zaven Boyrazian. LondonMetric Property (LSE:LMP) has been on a roll lately. Despite what the 33% drop in share price would suggest, the urban logistics property manager is seemingly thriving. In fact, as of October this year, occupancy stands at an impressive 99%, with an average lease term of 12 years among its tenants.
Even with e-commerce slowing on the back of reduced consumer spending, demand for urban logistics centres continues to grow – a trend management seems to be capitalising on successfully. As such, the stock offers an impressive 5.5% dividend yield.
With interest rates rising, real estate investment trusts like Londonmetric Property have been hit hard due to their high debt balances. But a closer look at the company’s loans reveals that 80% of its debts are either hedged or on a fixed rate.
In other words, the threat of rising interest rates to this business may not be as disastrous as many think. And that’s why I believe a buying opportunity in this stock has emerged for me.
Zaven Boyrazian does not own shares in LondonMetric Property.
Diversified Energy Company
What it does: Diversified Energy Company owns and operates around 67,000 mature natural gas and oil wells in the US.
By Charlie Carman. Diversified Energy Company (LSE: DEC) shares have climbed nearly 17% this year. The FTSE 250 stock offers a handsome 11% dividend yield.
A key reason I’m bullish is President Biden’s drive for American energy independence. As a domestic producer, the firm should benefit from White House policies designed to combat spiralling commodity prices fuelled by the Russo-Ukrainian war and OPEC+ production cuts.
In addition, I’m encouraged by the company’s recent share buyback scheme to capitalise on sterling’s weakness against the dollar.
Admittedly, DEC posted a $935m net loss in H1 2022, which concerns me. I’m also sceptical about the accounting accuracy of decommissioning liabilities, which assumes its old wells will survive until 2095.
Nonetheless, the business model looks healthy overall. In particular, I like the robust 22% free cash flow yield that underpins DEC’s market-leading dividend. With supportive government policies acting as a tailwind for the foreseeable future, I’d buy this stock in November.
Charlie Carman does not have a position in Diversified Energy Company.
DS Smith
What it does: DS Smith provides sustainable packaging solutions, paper products and recycling services worldwide.
By Kevin Godbold: Despite all the gloomy economic news around, DS Smith (LSE: SMDS) issued an upbeat trading statement on 10 October.
The company reported “good and consistent” trading. And the directors said overall performance for the year will likely be ahead of their previous expectations. DS Smith is one of many businesses that have been confounding the market’s expectations recently.
I like the company’s robust cash flow record — ideal for supporting its progressive dividend policy. And after prudently skipping a few dividends in the depth of the pandemic, DS Smith has jumped straight back in to the groove of pushing the shareholder payment a little higher each year.
There’s competition in the sector. But DS Smith is well established. And I think the industry has a tailwind. Meanwhile, with the share price near 290p, the forward-looking yield is running at around 6%. I think that’s attractive.
Kevin Godbold does not own shares in DS Smith.
Imperial Brands
What it does: Imperial Brands is a multinational tobacco company and is the world’s fourth-largest international cigarette company measured by market share.
By John Choong. The Imperial Brands (LSE: IMB) share price has remained rather robust this year, outperforming its parent index by quite some margin. Not to mention, its excellent dividend yield of 7% paired with a solid history of payment makes it a lucrative income stock to buy for my portfolio.
Luxury goods tend to benefit during times of inflation due to their inelastic demand. Most of Imperial’s products are catered to a niche market, and has been evident in the company’s last couple of results. Although growth hasn’t been stellar, it’s certainly been robust, while dividend payments continue to increase. The company also recently announced a share buyback programme, which should bring more value to shareholders.
With its next ex-dividend date estimated to be later this month, I’m planning on starting a position and capitalising on the ability to generate passive income in the current inflationary environment.
John Choong has no position in Imperial Brands.
Direct Line
What it does: Direct Line provides motor and general insurance in the UK.
By Christopher Ruane. Insurance tends not to be a very exciting business. In fact, it is often rather boring. As an investor, though, that is precisely why I like it. Demand is relatively stable, proven operators have enough experience to price risks at the right level, and the business model does not look like it will stop working any time soon.
Direct Line (LSE: DLG) has those characteristics. It avoids the more exotic corners of the insurance market and is highly profitable.
Right now, Direct Line shares yield 11.4%. That is certainly attractive to me, which is why I own some. It is also high compared to most FTSE 250 peers, though. Does that suggest a cut is coming? Rising vehicle costs pose a threat to profit margins and that could continue in coming years. But the company’s business model, iconic brand and large dividend make it appealing to me.
Christopher Ruane owns shares in Direct Line.
Tritax Big Box
What it does: Tritax Big Box REIT owns, manages and develops logistics real estate in the UK.
By Paul Summers: My pick for November is FTSE 250-listed real estate investment trust (REIT) Tritax Big Box (LSE: BBOX). Having tumbled over 40% in value in 2022, its shares yield a very respectable 4.9%.
Now, I could shoot for more income elsewhere. However, I’d rather back Tritax for two reasons. First, it’s a relatively low-risk way of tapping into the ongoing growth of e-commerce (the company provides warehouses for some of the biggest retailers around).
Second, the fact that REITs are able to raise rents to cover rising costs without too much fuss makes Tritax a great option for battling inflation.
Having coveted the stock for so long but been put off by the price tag, now could be an excellent time for me to begin building a position by buying its shares in November.
Paul Summers has no position in Tritax Big Box.
Aviva 8 ⅜% PF 8 ⅜ CUM IRRD PRF #1
What it does: Aviva is a multiline insurance company. Its preferred stock pays a fixed dividend of 8.375p per year.
By Stephen Wright. My best British income stock for November is Aviva 8 ⅜% PF 8 ⅜ CUM IRRD PRF #1 (LSE:AV.B) Catchy name, but what is it?
In short, it’s Aviva’s preferred stock. Unlike the common equity, the stock pays a fixed dividend of 8.375p per year.
That dividend has to be paid by management before any dividends get paid to common shareholders. And if it doesn’t get paid in a particular year, it rolls over and all of the outstanding dividends have to be paid to preferred shareholders before any are paid to holders of common stock.
The shares can’t be bought back by the company outside of an Extraordinary General Meeting. So I expect to keep receiving the dividends from these for some time.
In a turbulent market, I’m looking for something relatively predictable. That’s why I’ve settled on this as my choice.
Stephen Wright owns shares in Aviva 8 ⅜ PF 8 ⅜ CUM IRRD PRF #1.
M&G
What it does: M&G is a savings and investment management company, managing shares, real estate and other assets.
By Alan Oscroft. Like others in the investment management business, M&G (LSE: MNG) has fallen out of favour among investors in the current economic crisis.
The share price slumped when inflation started escalating a few months ago. After a modest October recovery, though, M&G is only around 10% down over the past 12 months.
That still leaves the forecast dividend on a hefty 10.5% yield. It’s risky relying on a dividend forecast. But M&G is currently engaged in a share buyback programme, which suggests it has the cash available.
The incoming chief executive and the chairman both bought M&G shares in October, which is also encouraging.
In the first half, its Wholesale Asset Management business achieved net client inflows for the first time since 2018. The second half could prove tougher, and that’s where the short-term risk lies.
But I’ll be considering M&G as the next stock for me to buy as a long-term dividend investment.
Alan Oscroft does not own M&G shares.
BlackRock World Mining Trust
What it does: BlackRock World Mining Trust in an investment trust that runs a diversified portfolio of global mining stocks.
By Ben McPoland. The decarbonisation of the global economy is going to take many decades. And this transition is going to need a lot of raw materials. Whether it’s iron ore to make wind turbines or lithium for the batteries of electric vehicles, decarbonisation is a massive tailwind for mining companies. The BlackRock World Mining Trust (LSE: BRWM) is perfectly placed to capture this demand, I believe, as it has positions in most of the companies mining and selling these vital raw materials.
Some of the trust’s largest holdings include BHP Group, Glencore, and Rio Tinto. It has a dividend yield of 7%, and the payouts have increased substantially over recent years
It should be noted that mining shares can experience much more volatility when compared to other investments. However, I’d be inclined to see dips in the trust’s stock price as opportunities to buy more for my holdings. I intend to start a position myself in November.
Ben McPoland has no position in BlackRock World Mining Trust.
