Dividend stocks are a popular investment and for good reason. With these shares there are two potential sources of return (capital gains and income).
Here, I’m going to highlight two UK-listed dividend stocks I’ve got my eye on in November. I think these income shares are worth a closer look.
A sleep-well-at-night stock
There’s a lot of economic uncertainty at the moment, so I’ve been looking at ‘defensive’ (sleep-well-at-night) stocks.
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And one I’m drawn to is consumer goods company Unilever (LSE: ULVR).
I think there’s a lot to like about this stock today. For a start, after a recent bout of share price weakness, its yield is quite attractive. Currently, the prospective yield on offer for 2024 is around 4.1% (well above its historical average).
Secondly, the company’s valuation is very reasonable. With analysts expecting Unilever to generate earnings per share of 277 euro cents next year, the forward-looking price-to-earnings (P/E) ratio is only about 16 (It’s worth noting that US rival Procter & Gamble currently has a P/E ratio of about 23).
That strikes me as attractive, given the power of the Unilever brands (Dove, Hellmann’s, Ben & Jerry’s, Persil, etc.), which are used by 3.4bn people across the world each day.
Third, the company is generating solid growth at present. For 2023, it expects to deliver underlying sales growth of more than 5%. Looking further out, it sees growth of 3-5% a year. This top-line growth should boost the share price in the long run.
One risk to consider is that consumers may be tempted to trade down to cheaper, non-branded products in the near term. This could lead to lower-than-expected top-line growth.
With that P/E ratio at 16 and the yield above 4% however, I like the risk/reward skew here.
Trading near 10-year lows
Another UK dividend stock that strikes me as attractive right now is Hargreaves Lansdown (LSE: HL.).
Its share price has taken a huge hit over the last two years (currently trading near 10-year lows), and I reckon there’s a lot of value on offer at the moment.
For the year ending 30 June 2024, analysts expect the company to generate earnings per share of 64.6p. That puts the forward-looking P/E ratio at just 11.5.
Given that Hargreaves is a highly profitable company with a strong balance sheet and solid long-term growth prospects, I think the earnings multiple is too low.
As for the dividend yield, it’s over 6% at the moment. That’s attractive.
But competition from new investment platforms is a risk to consider here. To compete, Hargreaves may have to lower its fees.
Another risk is competition from cash savings products, which have become far more attractive now that interest rates are higher. This could lead to slower growth for the company.
With a dividend yield of 6% plus on offer however, I think this stock is hard to ignore.
