3 dividend shares I’ve bought for the next decade!

I think these UK dividend shares can amplify my long-term passive income, and could even be on track to becoming future Dividend Aristocrats!

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When it comes to dividend shares, I’m only interested in owning businesses capable of delivering sustainable long-term income. Achieving this is far easier said than done. Apart from having to remain relevant for decades, firms have to outmanoeuvre competitors while simultaneously growing their cash flows. Don’t forget this is how dividends are ultimately funded and expanded.

The London Stock Exchange is home to a vast array of dividend-paying stocks. But finding future Aristocrats is no easy feat. And in most cases, a business will fall short. But I’ve spotted a few promising enterprises that might have what it takes. With that in mind, let’s explore three that are already in my income portfolio.

Energy, renovation and infrastructure

Greencoat UK Wind (LSE:UKW), Howden Joinery (LSE:HWDN), and Somero Enterprises (LSE:SOM) are three distinctly different businesses operating with their own unique approach. However, there are some similarities.

Should you invest £1,000 in Centrica right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Centrica made the list?

See the 6 stocks

Greencoat is capitalising on the renewable energy revolution, Howdens on home renovation, and Somero on industrial infrastructure. While technology’s rapidly changing the world as we know it, all three sectors are likely to be around for decades. And with their market-leading positions, these companies should follow suit.

Greencoat’s portfolio of wind farms is already the largest in the UK. And since demand for electricity’s only going up, the company has little trouble generating vast amounts of free cash flow at a high margin.

Howden’s in a similar position. The UK continues to suffer from a housing shortage, resulting in almost half of all properties being older than 50 years. Subsequently, the demand for home renovation continues to rise.

As for Somero’s laser-guided concrete laying screed machines, the group’s having little trouble finding opportunities to sell or lease its technologies to construction teams around the globe. The US is proving to be a particularly fruitful market thanks to the government’s enormous $1trn investment in revamping public infrastructure across the country.

Digging into dividends

Out of the three stocks, Greencoat’s currently leading the charge in terms of consecutive payout hikes. The group’s increased the dividend per share for nine years in a row, while Howden Joinery’s sitting at four years. Although it’s worth pointing out that before the pandemic came along, shareholders were enjoying an eight-year streak.

The odd one out is Somero, who has been a bit all over the place when it comes to shareholder returns. But digging a bit deeper reveals why. Unlike the other two businesses, cash generation from screed machines is far lumpier. Apart from being exposed to the cyclical nature of construction, the firm also has to deal with unpredictable weather conditions, which can delay projects.

Yet despite this volatility, compared to 10 years ago, dividends have increased by almost 10 times – a trend that looks set to continue in the long run.

Of course, these businesses aren’t without their weaknesses. Greencoat is highly dependent on energy prices, which are controlled and regulated, eliminating any form of pricing power. Howden’s is at the mercy of raw material price inflation. And Somero, as previously highlighted has been getting continuously handicapped by bad weather conditions.

Nevertheless, all three dividend shares look set to deliver long term value and passive income, in my opinion. That’s why I feel these risks are worth taking for the potential reward.

But there may be an even bigger investment opportunity that’s caught my eye:

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

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.

Zaven Boyrazian has positions in Greencoat Uk Wind Plc, Howden Joinery Group Plc, and Somero Enterprises. The Motley Fool UK has recommended Greencoat Uk Wind Plc, Howden Joinery Group Plc, and Somero Enterprises. 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

The BAE share price struggles despite strong earnings and a 10% dividend increase. Is it still a buy to consider?

The BAE share price dipped 3% in early morning trading after posting its full-year 2024 results. Our writer considers if…

Read more »

Investing Articles

Could this Nvidia-backed growth stock be a millionaire-maker at $10?

This little-known artificial intelligence growth stock is backed by chipmaker Nvidia and recently jumped nearly 24% in a single day!

Read more »

US Stock

£10,000 invested in the S&P 500 the day before the presidential election is now worth…

Jon Smith explains how the S&P 500 has performed since last November and identifies a key winner in the months…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Should I consider buying Glencore as its share price slumps to multi-year lows?

FTSE 100 stock Glencore continues to see its share price slump. Now at its cheapest since September 2021, should I…

Read more »

Investing Articles

£5,000 invested in Lloyds shares 3 months ago is now worth…

Lloyds shares have done well over the past three months but all of the bank's FTSE 100 peers have done…

Read more »

Investing Articles

Should I buy gold stocks for my ISA or SIPP as bullion prices surge?

Many gold mining stocks are doing well at the moment. Could they be a smart buy for Edward Sheldon’s investment…

Read more »

Investing Articles

The HSBC share price doesn’t know what to do after the bank releases its 2024 results

The HSBC share price had a mixed start to trading today after investors digested the bank’s latest results. Our writer…

Read more »

Investing Articles

Looking for defence stocks to buy? Consider this brilliant ETF

Late last year, Edward Sheldon was looking for the best defence stocks to buy. He ended up buying this ETF…

Read more »