I’m searching for the best dividend stocks to buy for my shares portfolio next month. Here are three that are very popular with UK share investors today.
Burberry Group
Dividend yields at Burberry Group (LSE:BRBY) aren’t the biggest. For the current financial year ending March, the luxury fashion house carries a decent-if-unspectacular yield of 2.3%.
But broker forecasts suggest the company might be a great bet for dividend growth. Total payouts are tipped to rise 9% in each of the following two fiscal years.
The FTSE 100 business could be in great shape to meet projected payouts too. Expected dividends are covered 2.1 times for these financial periods. What’s more, the trading outlook for Burberry appears quite robust, despite the gloomy macroeconomic environment.
Analyst Susannah Streeter of Hargreaves Lansdown recently commented that “the luxury end of the market looks set to ride out the cost-of-living storm, because wealthier consumers have much deeper pools of resilience to dip into.” Looser Covid-19 rules in China could also boost Burberry’s sales.
However, Burberry isn’t a stock I’ll invest in right now. Like billionaire investor Warren Buffett, I don’t purchase shares in companies whose operations I don’t fully understand. What makes (or doesn’t make) a successful fashion product is lost on me. So buying dividend shares I have a firmer grasp of is a less risky option.
Persimmon
It’s tempting for me to buy more Persimmon (LSE:PSN)shares for my Stocks & Shares ISA though. Its 7.6% dividend yield for 2023 makes it one of the biggest on the FTSE index.
I believe the long-term outlook for housebuilders like this remains exciting. Population growth, a fiercely-competitive home loans market and government support for first-time buyers should all drive newbuild home demand.
But a stream of worrying housing market updates is prompting me to hold off just now. Latest HMRC figures showed home sales in Britain drop 3% month on month in December. I’m also concerned about how high cost inflation will hit housebuilder profits.
Current dividend forecasts already look fragile based on profit estimates. Persimmon’s projected dividend for 2023 is covered just 1.3 times by expected earnings. This is well below the safety minimum of 2 times.
Glencore
There may be better ways for me to generate passive income in 2023. I don’t have a bottomless reserve of cash to draw upon. But Glencore (LSE:GLEN) is one dividend stock I’d like to buy when I have money to spare.
For one, dividend cover is much stronger at the mining giant. Coverage sits at a much-better 1.8 times. And Glencore has added balance sheet strength to help it meet current dividend projections as well.
Healthy cash generation has seen a huge reduction in net debt of late. It collapsed by 62% in the first half of 2022, to $2.3bn. This vast improvement in turn prompted it to launch a $3bn share buyback programme and award around $1.5bn in special dividends.
Glencore’s profits could disappoint if the global economy cools worse than expected. Demand for its coal, copper and other commodities might slump if consumer spending falls off a cliff and manufacturers respond.
But I think the risk and reward profile of the FTSE business remains highly attractive. The dividend yield here sits at a healthy 8.9%.
