I’m looking for the best dividend stocks to buy in what could prove another turbulent year. Here are two I’d love to add to my Stocks and Shares ISA when I next have cash to invest.
Begbies Traynor Group
Insolvency specialist Begbies Traynor Group (LSE:BEG) has grown dividends for six straight years, including a 9% year-on-year hike in the last financial period (to April 2023). This is thanks to its excellent cash generation and impressive acquisition-based growth strategy.
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City analysts shareholder payouts to keep rising strongly, too. So investors can enjoy healthy dividend yields of 3.6% and 3.8% for financial 2024 and 2025.
Begbies’ counter-cyclical operations make it ideal for today’s current tough conditions. Demand for its services has peaked as the number of companies in severe financial distress has unfortunately surged.
Latest research from the AIM-listed company shows that the the number of businesses experiencing trouble is picking up momentum, too. Those close to financial collapse soared 25.9% between the third and fourth quarters of 2023, to 47,000. There were also 539,900 firms in ‘significant’ financial distress in quarter four, up 12.9% over the same time period.
Begbies — whose revenues jumped 13% in the six months to November — is expanding its headcount to capitalise on these conditions, too. While an unexpected economic upturn could sap this momentum, right now the business looks in great shape.
And its strong balance sheet gives it extra scope to continue growing business through acquisitions. Last month it agreed to acquire property auctions business SDL Property Auctions for an initial consideration of £2.5m.
BAE Systems
Defence companies like BAE Systems (LSE:BA.) can also be great growth dividend stocks to buy. Their high-tech products tend remain in strong demand at all stages of the economic cycle, giving them the profits and the cash flows to increase shareholder payouts over time.
Unlike smaller industry operators, BAE Systems also has a deep balance sheet that it can use to pay large dividends. This blend of stability and plentiful resources has given it the means to grow annual dividends for many years, as can be seen in the chart below.
Chart created with TradingView
Project delays and lumpy contract timings are a constant threat for defence companies and their profits. Yet I think this is unlikely to hamper further dividend growth at this FTSE 100 firm, and City analysts agree.
Shareholder payouts are tipped to rise again for both 2023 and 2024. Consequently BAE Systems shares carry a decent 2.7% forward dividend yield.
Investors can get better near-term dividend yields with other Footsie stocks. But there may be few better to deliver payout growth over the next decade. NATO’s military exercises later this week — which will be the largest since the Cold War — underline the growing importance countries are placing on military preparedness as geopolitical worries mount.
BAE Systems’ expertise across multiple product segments, combined with its critical supplier status with the US and UK, means it should win massive amounts of business in this climate. Its record order backlog of £66.2bn as of last June underlines its massive growth potential.
