My top 3 dividend stocks to buy in September

Stephen Wright’s top dividend stocks for September include a FTSE 100 insurer, a FTSE 250 healthcare REIT, and a food company owned by Warren Buffett.

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Investing in dividend stocks can be a great way of earning passive income. And the power of compound interest means the sooner someone gets started, the more they can earn over time.

With that in mind, I have three dividend stocks on my list to buy this month. Right now, I think rising interest rates are creating opportunities in various different industries and geographies.

Admiral

From the FTSE 100, I’m seriously considering buying shares in Admiral (LSE:ADM). The stock is actually up 10% since the start of the year, but I still think there’s a buying opportunity here.

Car insurance is a difficult business to be in – over the last decade or so, the industry as a whole hasn’t done much better than break even with its underwriting. By contrast, Admiral has been consistently profitable. 

I think this indicates that the company’s technological advancements are giving it a meaningful edge over its competitors. And this puts it in a very strong position going forward in an industry people need.

Inflation is a risk here. But with interest rates rising, the company should be able to earn a better return on its investments to offset rising costs, which is why I think the outlook for the business is good.

Primary Health Properties

I’m also looking to add to my stake in FTSE 250 real estate investment trust Primary Health Properties (LSE:PHP). The company leases doctor surgeries and health centres to (in most cases) the NHS.

The company enjoys high occupancy levels and the probability of unpaid rent seems minimal with 89% of its income coming from government agencies. The main risk to consider is the issue of rising interest rates.

This isn’t a good thing for a company with substantial debt and a lot of buildings. But there’s still some way to go before the business gets into any serious danger from either covenant breaches or rising interest payments.

Overall, I see this as a steady source of passive income going forward. And buying it at a price it was trading at in 2015 seems like a great opportunity to me.

Kraft Heinz

Lastly, US food company Kraft Heinz (NASDAQ:KHC) is on my list of stocks to buy. With the share price down 18% since the start of the year, the dividend yield is now just under 5%. 

I think the business has two especially attractive factors. It is in a sector that is resistant to economic downturns and its brands and scale give it a significant advantage over its competitors.

Looking ahead, there’s a risk persistent inflation might put pressure on margins by increasing costs. But in the US – where most of the company’s revenues come from – inflation has been coming down fairly well. 

Over the last five years, the business has been improving its financial position by reducing its debt. As a result, I expect the company to be it in a much better position to return cash to shareholders going forward.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stephen Wright has positions in Kraft Heinz and Primary Health Properties Plc. The Motley Fool UK has recommended Admiral Group Plc and Primary Health Properties Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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