3 great dividend stocks to buy in July

Right now, many investors are turning to dividend stocks for protection. Here, Ed Sheldon highlights three shares he’d buy in July.

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Dividend stocks are getting considerable attention right now and it’s easy to see why. The key feature of these stocks is that they pay out cash to investors on a regular basis. These payouts can offer protection when share prices are falling (like they are now).

Here, I’m going to highlight three UK-listed dividend stocks I like the look of as we approach July. If I was looking to invest in dividend-paying companies today, these three would be high up on my buy list.

A sleep-well-at-night stock

I’ll start with Reckitt (LSE: RKT). It’s a FTSE 100 consumer goods company that operates in the areas of health, hygiene, and nutrition. It offers a prospective yield of 2.8% at the current share price.

I think Reckitt could play a valuable role in my portfolio right now as it’s a defensive stock. Its brands include ever-popular names such as Dettol, Strepsils, and Nurofen. People are unlikely to stop buying these brands if we see a recession. So, owning this stock is not going to keep me awake at night.

Reckitt’s recent Q1 results were encouraging. During the quarter, the company was able to raise its prices by 5.3%. This led to 5.6% like-for-like sales growth and helped offset cost pressures.

Reckitt is not a cheap stock. Currently, the forward-looking P/E ratio is about 20, which adds a little risk. I’m comfortable paying the higher valuation though, given the company’s defensive attributes.

Real assets

Next up is Renewables Infrastructure Group (LSE: TRIG). It’s a FTSE 250-listed investment company that owns a portfolio of clean energy assets. It currently sports a yield of about 5.1%.

I like this stock for two reasons. First, renewable energy is a booming industry with a long growth runway. So, I think the company is likely to do well over the next decade.

Secondly, the company owns a portfolio of ‘real assets’. These are physical assets that have real intrinsic value due to what they provide to society. These assets can be a good hedge against inflation as their revenues are often inflation-linked. That’s the case here. When inflation rises, so does its revenues.

A risk here is that the stock is currently trading at a premium to its net asset value (NAV). In other words, if I bought shares now I’d be paying a price that’s higher than the sum of the company’s assets.

I don’t mind paying a premium here, however, given the long-term potential.

A small-cap dividend play

Finally, in the small-cap space, I like Impax Asset Management (LSE: IPX). It’s a niche investment company that specialises in sustainable strategies (a high-growth market). The prospective yield here is about 4% right now.

Impax shares have taken a big hit in 2022 and I think this is unjustified. Recent results for the six months to 31 March showed a 64% rise in adjusted operating profit. Meanwhile, the interim dividend was raised by 31%, which suggests management is confident about the future.

It’s worth noting that if stock markets drop, Impax’s earnings will be impacted. After the recent share price fall, however, I think a lot of risk is priced in.

With the stock now trading with a P/E ratio of 15, I’d be happy taking a small position here.

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 considered so you should consider taking independent financial advice.

Edward Sheldon has positions in Reckitt plc. The Motley Fool UK has recommended Reckitt plc. 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.

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