Investing for dividends has been challenging for UK investors this year. As a result of Covid-19, over 40 companies in the FTSE 100 index have either suspended or cancelled their dividends.
However, there are still plenty of UK companies paying dividends to their investors. Here’s a look at three I like the look of right now.
A UK dividend share with a 5% dividend yield
The first I want to highlight is healthcare giant GlaxoSmithKline (LSE: GSK). It paid out total dividends of 80p per share to investors last year, which equates to a trailing yield of around 5% at the current share price.
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In its recent first-quarter results, Glaxo declared a first interim dividend for 2020 of 19p per share, in line with the dividend for the same period last year. And looking ahead, the company advised it currently intends to pay out 80p per share in dividends for 2020, assuming there’s no material change in the external environment or performance expectations. This suggests GSK will continue to be a cash cow for investors.
As a specialist in pharmaceuticals, vaccines, and consumer healthcare products, I think Glaxo looks well-positioned for growth in the current environment. With the stock trading on a P/E ratio less than 14 and sporting a yield of around 5%, I think it’s a good time to be buying.
Powerful dividend growth
Sticking with the healthcare sector, I also like the look of Hikma Pharmaceuticals (LSE: HIK) right now. It’s an under-the-radar FTSE 100 healthcare company that’s focused on developing, manufacturing, and marketing branded and non-branded generic medicines.
This UK dividend share doesn’t have the highest yield. Last year, the company paid out 44 cents per share which, at the current share price, equates to a trailing yield of about 1.6%. However, what stands out to me here is the growth rate of Hikma’s payout.
Over the last five years, the dividend payout has doubled. You don’t see that kind of growth within the FTSE 100 index very often. Moreover, dividend coverage is very high. This suggests there could be plenty more growth to come.
Hikma shares currently trade on a forward-looking P/E ratio of about 17. I see that valuation as attractive. I think this stock has the potential to deliver both capital gains and dividends.
21 consecutive dividend increases
Finally, I see a lot of appeal in alcoholic beverages champion Diageo (LSE: DGE) at the moment. It paid out 68.6p in dividends last year, which translates to a trailing yield of about 2.5% at the current share price.
Diageo has a superb long-term dividend growth track record. Since the company paid its first dividend back in 1998, it’s notched up 21 consecutive annual increases. There aren’t many companies that can boast that kind of impressive track record.
In the short term, Diageo’s earnings are likely to take a hit due to Covid-19. However, I think it’s unlikely that the FTSE 100 company will cut its dividend. I imagine the company will do everything in its power to maintain its enviable dividend track record.
Diageo is currently trading nearly 25% below its 52-week high. It’s not often you see that kind of pullback with this FTSE 100 stock. I’d buy this UK dividend stock today while it’s out of favour.
