Largely speaking, 2021 was a great year to own UK dividend stocks. Shareholder payouts rocketed from the previous year as profits bounced back from the initial Covid-19 shock and corporate confidence improved.
Owners of mid-cap stocks in particular had plenty to celebrate. According to Link Group, dividends among such shares — firms whose market-caps range £1.5bn-£7.4bn ($2bn-$10bn) — soared 40.1% year-on-year in 2021. That’s more than twice the pace at which FTSE 100 shares rose last year.
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Link Group said: “Mid-caps benefited from cancelled dividends being restored and the cyclical upswing to which they tend to be more sensitive.”
The prospect of more strong rises in 2022 is fraught with danger as Covid-19 drags on and inflation surges. But I still think mid-cap stocks could have another blistering year.
Here are two mid-cap dividend stocks I’m considering snapping up today.
I think defence companies like Ultra Electronics (LSE: ULE) could have an exceptional 2022 as geopolitical tensions boil over. It’s not only a possible Russian invasion of Ukraine that’s putting the West on edge. A jump in the number of Chinese airplanes flying over Taiwan is a reminder of Beijing’s expansionist foreign policy in Asia too.
In this environment I expect orders of Ultra Electronics’ systems, which include sonar and radar systems on boats and providing mission-critical intelligence, to remain rock-solid.
I also like Ultra Electronics because of its expertise in electronic warfare. It’s my belief that revenues from its cyber security systems could balloon as countries duke it out on virtual battlefields. Researchers at Fortune Business Insights think the electronic warfare market will be worth $33.5bn by 2028, a $10bn rise from last year’s levels.
City analysts expect earnings at Ultra Electronics to rise for a fourth consecutive year in 2022. And they predict dividends to leap 7% too. This leaves the FTSE 250 stock with a healthy 2% dividend yield. I’d buy this UK dividend stock despite the ever-present danger of a systems failure that could prove catastrophic for future sales.
I’m tipping Glanbia (LSE: GLB) to have a strong year too as demand for its high-protein products soars. Its supplement brands such as Optimum Nutrition and SlimFast are becoming increasingly popular as people seek to live healthier lifestyles. Glanbia also makes ingredients that allow food manufacturers to improve the nutritional content of their goods.
The protein supplements market is particularly huge as people take up sports and visit the gym in increasing numbers. Experts at Allied Market Research think the industry will be worth $8.7bn by 2025, up significantly from $4.9bn in 2017.
This explains in part why City analysts think Glanbia’s earnings will rise in 2022 and that dividends will follow suit. A 5% yearly dividend increase is being tipped, a prediction that creates a decent 2.7% yield. I think Glanbia’s a hot stock to buy even though it faces huge competition in the supplements industry.