Right now, investors all over the world are scrambling to buy artificial intelligence (AI) stocks. And this is understandable, as AI looks set to have a huge impact on our lives in the years ahead.
Having said that, history shows that when investors are chasing hot growth stocks, it’s often a great time to be investing in more ‘boring’ dividend-paying companies. With that in mind, here are three high-quality UK dividend shares to buy today.
Quietly moving higher
First up is Unilever (LSE: ULVR). It’s a consumer goods giant that owns Dove, Domestos, Hellmann’s, and a bunch of other well-known brands.
I’ve been buying more Unilever shares in recent weeks, and there are a few reasons why.
One is that the company is relatively recession-proof as consumers tend to buy its products throughout the economic cycle. This is important, as major economies are experiencing a significant slowdown right now.
Another is that the stock has been quietly moving higher over the last year and many brokers expect it to keep rising. Jefferies, for example, just raised its target price from 4,650p to 5,000p – about 20% above the current share price.
Inflation is a risk here. It could impact profitability going forward.
However, with the stock trading on a P/E ratio of 19 (lower than many rivals’ P/E ratios) and offering a dividend yield of 3.6% I like the risk/reward setup.
A world-class company
Another dividend stock I’m considering buying more of right now is Diageo (LSE: DGE). It’s the owner of Tanqueray, Smirnoff, and many other well-known spirits brands.
Diageo is generally considered to be one of the highest-quality stocks in the FTSE 100. It has strong brands, solid growth prospects, an incredible long-term track record (20+ years of consecutive dividend increases) and it’s relatively recession-proof. As a result, it’s a stock that has historically been very popular.
Yet right now, Diageo shares are trading about 15% below their all-time highs. It seems that many investors have lost interest.
I think this is a great time to buy.
Sure, the yield here isn’t that high. Currently, it’s only around 2.3%.
Yet with the company set to benefit from rising wealth in the emerging markets, I think there’s potential for attractive overall returns in the years ahead.
Attractive yield on offer
A third dividend stock I think has considerable appeal right now is National Grid (LSE: NG.). It’s a utilities company that’s focused on the transmission and distribution of electricity and gas.
This stock has the highest yield of the three. Earlier this month, the company declared dividends of 55.44p per share (up 8.8% year on year) for the financial year ended 31 March. At today’s share price, that equates to a yield of around 5.1%.
There’s more to this stock than just a high yield, however. Like Unilever and Diageo, it’s defensive in nature. So it’s a sleep-well-at-night stock.
It also has growth potential. This is a company that’s at the heart of the energy transition. And it expects to generate solid earnings growth in the years ahead.
One risk to keep an eye on here is debt. At 31 March, net debt stood at £41bn.
Overall however, I see National Grid shares as a solid investment right now.
