2 top dividend shares to buy in September

Andrew Woods explains his best dividend shares for September, while detailing how the respective businesses are handling the broader economic climate.

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Investing in dividend shares can be a smart way to derive income. This may come in the form of dividend payments or share buyback schemes. To that end, I’ve found two companies that I think could help me create an income stream. Let’s take a closer look.

Dividends of brick and mortar

The shares in Ibstock (LSE:IBST) are up 8.4% in the past year and, at the time of writing, they’re trading at 191p.

For 2021, the construction materials manufacturer paid a total dividend of 7.5p. At current levels, this equates to a dividend yield of 3.93%.

In May, the firm also announced that it would be embarking on a £30m share buyback scheme. This is simply one way for the business to return profits to shareholders and, therefore, an additional way to derive income.

For the six months to 30 June, revenue increased 28% to £259m. Furthermore, underlying cash profit rose by 29%, coming in at £71m.

I’m always aware, though, that this growth is not guaranteed in the future.

These recent results, together with the share buyback scheme, are an indication that the company is in a solid financial state.

However, there is the real threat that the cost of raw materials needed for Ibstock’s products rises. This could result in shrinking profit margins. 

Despite this, the business increased its interim dividend by 32% to 3.3p.

Feeding my income stream

Second, the Bakkavor (LSE:BAKK) share price has fallen 10.5% in the last month and the shares are trading at 85p at the time of writing.

In 2021, the producer of fresh prepared foods paid a dividend of 6.6p, equivalent to a yield of 4.66%. As an investor looking for high dividends, I find this very attractive.

It’s important to note, however, that dividend policies may be subject to change at some point in the future.

For the 13 weeks to 26 March, revenue increased by 11.5%, to a total of £485.4m. In addition, the business stated that it had £180m of liquidity.

However, given Bakkavor’s global presence, it’s still suffering in regions where lockdowns are common, especially China. This means that results are still being stifled by pandemic-related issues. 

Nevertheless, the strong liquidity indicates that the firm may be able to make it through any short-term difficulties.

Furthermore, it still expects full-year results to be in line with expectations. This gives me confidence that weaknesses in different global segments may soon subside.

Overall, these companies boast attractive dividend yields. While there are challenges for both firms, I’m quite confident that they may overcome these in the near future. As such, I’ll add these businesses to my portfolio soon, in anticipation of potential future income through dividends, while exposing myself to consistent growth.

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.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended Ibstock. 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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