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 September!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
British American Tobacco
What it does: British American Tobacco manufacturers and sells tobacco products across the globe.
By Charlie Keough. As I write, British American Tobacco (LSE: BATS) provides investors with a meaty yield of nearly 9%, placing it firmly within the FTSE 100’s highest payers.
Of course, it’s worth noting that high yields might not be sustainable. Moreover, a business can slash or cut a dividend at any time.
However, I’m not worried about this. That’s because British American Tobacco has raised its dividend annually for decades, including a 6% jump last year. Furthermore, with solid cash flows, I expect this trend to continue.
The biggest threat to the business is the falling popularity of smoking as the push for a ‘smoke-free’ world continues. Yet despite the potential for a drop in cigarette use, the industry is still massive.
On top of this, with its grip on the market, the firm has strong pricing power and the ability to pass on costs. It’s also been diversifying in recent times as it moves to non-cigarette products.
It will certainly face headwinds in the coming years, but with its growing diversification and solid income, I like the look of the dividend stock.
Charlie Keough has no position in British American Tobacco.
Hargreaves Lansdown
What it does: Hargreaves Lansdown is an investment management company and it owns one of the biggest fund supermarkets in the UK.
By Kevin Godbold. There’s a strong multi-year dividend record at Hargreaves Lansdown (LSE:HL.). The company has delivered annual increases in shareholder payments since at least 2017, including through the pandemic years.
Strong annual free cash flow backs up dividend payments. City analysts expect a further double-digit percentage advance in the dividend for the current trading year to June 2024. That’s after a robust trading statement in July covering the fourth quarter to June 2023.
With the share price in the ballpark of 761p, the forward-looking yield is around 6%. And the business looks set to continue its steady trading because of its strong brand.
But the sector is competitive and that adds risk for shareholders now. It’s possible the company may need to reduce profit margins in the future to remain an attractive proposition for its customers.
However, the valuation is lower than in 2019. And I see the dividend stock as attractive for income.
Kevin Godbold does not own shares in Hargreaves Lansdown.
Hargreaves Lansdown
What it does: Launched in 1981 by Peter Hargreaves and Stephen Lansdown, this remains the best-known investment platform for DIY investors.
By Harvey Jones. I’ve surprised myself by picking out Hargreaves Lansdown (LSE:HL.) as one of the best dividend stocks to buy in September. For most of my investing career, I’ve seen this as a growth stock rather than a source of income.
That’s changed as the company is now focused on staying in the FTSE 100, rather than powering towards it.
The Hargreaves share price has had a bumpy time lately, falling 65% over five years and 13.38% over the last 12 months. August was another tough month on the stock, as it was hit by wider market value volatility.
Falling markets hit the value of net assets under management and deters investors from parting with their cash.
However, this brings two benefits. First, Hargreaves Lansdown now trades at around 15 times earnings, whereas for years its valuation was closer to 25 times.
Second, the yield is way higher. Instead of around 2%, it’s now forecast to yield 5.49% in 2023 and 6.11% in 2024.
When the stock market sentiment finally picks up, the share price could follow, too. September looks like a tempting entry point for a long-term investor like me.
Harvey Jones does not own shares in Hargreaves Lansdown.
Tritax Big Box
What it does: Tritax Big Box REIT owns and operates large warehouses and distribution hubs in the UK.
By Paul Summers: I continue to believe that Tritax Big Box (LSE: BBOX) shares will recover well once the economic clouds pass. In the meantime, the FTSE 250 stock looks like a great option for dividend hunters.
Right now, the real estate investment trust yields 5.3% based on analyst projections. That’s a whole lot more than I’d get for holding a fund that tracked the index in which it features (3.5%).
Granted, the near-term outlook is pretty gloomy. More interest rate rises will likely damage the company’s growth plans due to the increased cost of borrowing.
But the long-term investment case remains solid. Now that online shopping has become the norm for many of us, there will always be a need for companies to store their products in the assets Tritax owns and send them to customers as quickly as possible.
Paul Summers has no position in Tritax Big Box
