Despite all the turmoil in the UK economy and the stock market in general, several FTSE 100 dividend shares are still rewarding loyal investors. As of July, the index was delivering a yield of 3.7%. And while I could just buy an index tracker to tap into this passive income opportunity, picking individual stocks opens the door to far better income prospects.
With that in mind, let’s look at what I think are the best dividend shares to buy now.
The best home improvement dividend shares?
With the housing market expected to suffer a slowdown in 2023, investing in home improvement may seem like an odd choice. But this may not be as disastrous as it looks on the surface. The average house age in the UK hit 32 years at the end of 2021. And with properties getting older, the demand for renovations and repairs is rising.
That’s excellent news for Howden Joinery Group (LSE:HWDN). The FTSE 100 firm is a leading expert in designing fitted kitchens, along with other house renovation offers, working directly with tradesmen through its network of 750+ depots.
It’s not the fastest-growing enterprise out there. But revenue has been growing at a double-digit rate these past five years. And with profit margins expanding as management improves its operational infrastructure, earnings are growing even faster.
All this points to reliable dividend shares in my experience. And while the yield is only 3.14%, management’s buyback programme has reduced the number of shares outstanding by around 1% a year. That brings the effective yield to a more impressive 4.14%.
While the business generates most of its income from home renovation, new-builds do contribute to the bottom line. And a housing slowdown could therefore have a tangible impact on earnings if homebuilders wind down construction efforts.
Nevertheless, as a long-term investor, this business seems like a fine addition to my income portfolio, even with this risk.
A flagship FTSE 100 pharmaceutical firm
Another industry I feel isn’t likely to disappear anytime soon is healthcare – specifically pharmaceuticals. Researching and developing new drugs to bring to market isn’t exactly easy, nor is it cheap. Fortunately, that’s less of a problem for Hikma Pharmaceuticals (LSE:HIK).
The group is a world-leading generics business. That means instead of focusing primarily on developing new treatments, it recreates drugs that have come off patent to improve both availability and affordability for patients.
Lately, these dividend shares haven’t been the best performers, with the stock price tumbling 44% over the last 12 months as competition in the US heats up. While that’s a bit of a concerning sign, investments into its injectables and branded divisions seem to be paying off in terms of growth. This is expected to accelerate following its latest acquisitions.
To me, this looks like a buying opportunity for my portfolio, despite the competitive challenges. Today, the dividend yield stands at 3.26%. But paired with its ongoing share buyback programme, that yield rises closer to 4.1%.
