Every month, we ask our freelance writers to share their top ideas for dividend stocks to buy with you — here’s what they said for July!
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Barclays
What it does: Barclays is a British universal bank, headquartered in London, with operations around the world.
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By Dr James Fox. Today, Barclays (LSE:BARC) offers a 4.7% yield. That’s not world-beating, but it’s above the index average. So, why is Barclays my best dividend stock for July? Well, it’s because of the forward dividend yield.
In 2022, the bank’s dividend was covered 4.25 times. That’s far better than what we normally consider safe. And this also means, thanks to continued strong performance in Q1, there is room to grow the dividend.
As such, analysts’ forecasts suggest the company will pay a dividend of 8.6p per share in 2023, and 9.7p per share in 2024, up from 7.25p in 2022 and 6p in 2021. These forecasts would represent a forward yield of 5.7% and 6.4% for 2023 and 2024 respectively.
My biggest concern is near the term impact of more rate rises – higher impairment charges – but in the medium term, when rates moderate, things look a lot brighter.
James Fox owns shares in Barclays.
Income & Growth
What it does: Income & Growth is a venture capital trust that invests in small and medium enterprises with growth potential
By Christopher Ruane. The Income & Growth (LSE: IGV) venture capital trust said this month that it intends to keep targeting an annual payout of 6p per share. It has paid at least this every year for over a decade. Last year’s dividend was 8p per share.
For a share that has been trading close to 70p lately, that means that the prospective yield should be around 8.6%, but could be higher. The interim payout this year of 4p suggests the trust is potentially in line to match last year’s full-year dividend of 8p per share.
Income & Growth has proven its approach over many years. There are risks, of course: an economic slowdown could hurt profitability at young companies, meaning the trust’s own income falls.
As a long-term investor, though, I think the approach of investing in carefully selected young companies could continue to work well for Income & Growth. That could fund more big dividends in future.
Christopher Ruane does not own shares in Income & Growth.
M&G
What it does: M&G is in the savings and investments business, providing savings and asset management services to individuals.
By Alan Oscroft. M&G (LSE:MNG) stock has climbed up the dividend table in 2023, as inflation and interest rates hit investors in the pocket.
When there’s less cash to invest, investment firms like M&G will suffer, so their shares are worth less. That’s the reasoning, and it’s helped push M&G shares down.
Well, the fall actually hasn’t been too bad, with the price down 16% since the firm was spun out from Prudential in 2019.
But it has helped push the forecast dividend yield up to 10% now, one of the biggest in the FTSE 100 at the moment.
The main risk I see is that forecasts tend to lag reality, and we might not get that yield. Any pressure on profits could mean less cash for dividends.
But with a long-term view, I see the investment business as a cash cow. And if we buy shares when they’re weak, we can lock in higher yields.
Alan Oscroft does not own M&G or Prudential shares.
The PRS REIT
What it does: The PRS REIT is a real estate investment trust that recently built its 5,000th private rental home.
By Royston Wild. Investing in property stocks can be an effective way for individuals to protect their wealth in inflationary times. These sorts of companies can often introduce weighty rent hike to offset rising costs and thus protect profits.
With inflation remaining sticky in the UK, I believe The PRS REIT (LSE:PRSR) could be a top dividend stock to buy for July. It’s already benefitting from the rental market’s deteriorating demand and supply imbalance and is raising rates accordingly. Like-for-like rents on stabilised sites increased 5.7% here during the six months to March.
Rent growth is actually accelerating across the market as mortgage costs rise and the market’s supply crunch worsens. Latest Office for National Statistics data showed private rents increase 5% in May. This was the highest annual change since records began in 2016.
Today PRS carries a healthy 5.1% dividend yield for the new financial year beginning in July. High build cost inflation remains a danger to profits, but signs of moderation here are encouraging.
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Royston Wild does not own shares in The PRS REIT.
