4 UK shares I’d pick to buy and hold for dividends

I’ve been looking for UK shares to buy and hold for dividends. Three of the companies on my list are household names – one’s not.

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.

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.

Trading shares frequently can be exhausting. Plus it can eat into returns due to commission. A lot of wise investors buy into great companies then tuck the shares away for decades. Here are four UK shares I’d buy now.

Long-term dividend payers

Diageo is well-known for its drinks such as Smirnoff and Guinness. Something equally tasty to me is its dividend history. The company has raised dividends annually for over three decades. It currently yields 2%, which isn’t massive but would be welcome income nonetheless. With its long history of dividend raises, I would hope that the dividend will continue to grow in coming years.

I expect its portfolio to continue growing for decades. The company has been acquisitive, picking up new brands such as Aviation Gin to stay current as drinking trends change. One concern I do have about the company is whether a shift towards healthier lifestyles could damage demand for alcohol. For a company as exposed to alcohol as Diageo, that could be a significant dent to the business model.

Tobacco giant British American Tobacco has also increased payouts each year for several decades. Indeed, it announced today that it would raise the full-year dividend again by 2.5%.

Like Diageo, it has a global portfolio of well-known brands, like Rothmans. Its latest dividend rise was supported by a double-digit rise in operating profit, which I find impressive. However, demand is expected to fall long term. Revenue slipped in the past year, albeit only by 0.4%. More revenues falls in future could damage profits too. The company has some pricing power and is extending into cigarette alternatives, but it’s not clear yet if they will ever be as profitable.

After the shares pulled back following the results, the company now yields 8%. It’s one of my UK shares to buy for dividends and I am considering expanding my position.

A serial dividend raiser

Less-well-known but also attractive to me is conglomerate DCC. This is another serial dividend grower, which has raised its dividend steeply for many years. The most recent increase was smaller than the years before, but still came in at an attractive 5%.

DCC yields over 2%. Its management is top notch, with a long focus on shareholder returns. So while a 2% yield isn’t that big, I’m hopeful the company will keep raising the payout regularly.

But I’m aware that the company is exposed to markets like domestic gas, where future demand is uncertain. It also trades in a number of markets, so profits can be affected by swings in exchange rates.

A well-known insurer among my UK shares to buy

Finally, insurer Legal & General is a household name. That brand recognition helps its business, I feel. But the shares continue to offer value in my view, paying a dividend yield over 6%. I’d pick them now as UK shares to buy. I see the insurance market as fairly stable, so unless there are unexpected events I expect the dividend to keep rising in years to come. So far, Legal & General hasn’t followed rival Aviva in reducing its dividend but if profits fall in future, it could do.

For me right now, it’s among a basket of UK shares to buy and hold for dividends.

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.

christopherruane owns shares of British American Tobacco. The Motley Fool UK has recommended Diageo. 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.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

Up 915% in a decade! This growth monster may also be the best FTSE income stock of the lot

Harvey Jones has been watching this top FTSE 100 growth and income stock for months and now he's found another…

Read more »

Investing Articles

The tax-free route to millionaire portfolios

• Although annual ISA subscriptions are capped, ISAs are an undoubtedly serious wealth-building tool: you can build serious wealth.

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Will FTSE 100 shares soar 35% after the general election?

Royston Wild explains why FTSE 100 shares might be about to soar, and discusses a top penny stock that could…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

After gaining 34% in a month, is the Nvidia share price now uninvestable?

Our author says the Nvidia share price is very high at the moment. He's cautious when considering investing in the…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

This under-the-radar FTSE 100 share has hiked dividends 13.7% a year for a decade. Time to buy?

Harvey Jones is kicking himself for missing out on this FTSE 100 share that's kept investors happy with long-term share…

Read more »

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Labour winning the general election would be positive for UK stocks, says JP Morgan

One mega-bank thinks certain UK stocks could benefit following the 4 July election. This writer considers a FTSE share that…

Read more »

Older couple walking in park
Investing Articles

No savings at 40? Here’s how I’d aim to retire comfortably with FTSE 100 stocks

It's never too late to begin investing in FTSE 100 stocks for retirement. Royston Wild reveals three steps to help…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Down 17%, is National Grid’s share price a FTSE 100 bargain?

National Grid's share price has taken a battering following a multi-billion-pound rights issue and dividend rebasement. Is it now too…

Read more »