5 dividend stocks for September

Here are five dividend stocks I’d consider buying on the basis of high yields, good dividend cover and historical growth.

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.

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.

Image source: Getty Images

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.

I like dividend stocks. Any money received can be reinvested to increase the total return when trying to grow my portfolio. And I can spend the payouts instead of reinvesting them when I want to start taking income from my investments. So, I’m always looking for great dividend stocks to add to my Stocks and Shares ISA. I think the following are some of the best Footsie picks right now:

  • Anglo American
  • Glencore
  • Investec
  • Redde Northgate
  • Taylor Wimpey

Why these stocks? I like above-average yields, a measure of safety in the dividend, and a track record of payout growth.

Above-average yields

The average yield of stocks in the FTSE 100 index is 3.4%. Taylor Wimpey has a forward dividend yield of 9.8%, and Glencore offers 8.8%. Both comfortably beat the Footsie and the highest-yielding UK index, the FTSE Small Cap, which is at 4.2%.

I don’t chase dividend stocks with high yields alone though. Yes, companies that pay oversized dividends that consume too much of their earnings (or even exceed them) pay out a lot. However, they’re unlikely to be investing in their businesses, meaning earnings could stall or fall in the future, and so will the cash I can get from them every year.

Key figures

StockForecast Dividend YieldForecast Dividend Cover Dividend per share 10-year CAGR
Taylor Wimpey9.8%2.1x32.4%
Glencore8.8%2.6x7.1%
Investec6.6%2.1x3.4%
Redde Northgate6.5%2.0x22.6%
Anglo American6.4%2.3x15.4%
Source: Consensus forecasts via the Financial Times stock data pages

Ideally, I’d like to see forecast cover of at least twice what earnings will be. Glencore is expected to cover its dividends 2.6 times with earnings. Anglo American is expected to earn 2.3 times what it pays out in dividends. That’s a measure of safety that I can draw comfort from.

Growing dividend stocks

I prefer my stocks to have a track record of increasing payouts to shareholders. A respectable compound annual growth rate in a company’s dividend per share may signify financial stability and growth. That means Investec might look like a laggard as it grew its dividends by an average of 3.4% over the last 10 years, especially compared to Redde Northgate, which managed a 22.6% growth rate.

However, positive growth is positive growth, and I’m considering historical dividend growth in combination with the forecast yield and cover. But I must remember that past performance isn’t necessarily indicative of future performance. Two of these stocks, Anglo American and Glencore, are mining companies. Inflation might benefit them now, but a recession (perhaps prompted by interest rate rises intended to curb that inflation) would hurt their bottom lines.

Investec is an international banking, investment and wealth management company. Taylor Wimpey is a housebuilder. Redde Northgate makes its money servicing and selling vehicles to businesses. An economic downturn would cause these companies to suffer. All five of these stocks would have their dividends put under pressure in the event of a recession. So, with that in mind, would I add any of these dividend stocks to my portfolio?

Well, Anglo-American is already in there. Investec has been on my watchlist for a while, and now I’m considering the others too. But before pressing the button and buying them this September, I need to assess how well they would combine with the other stocks in my portfolio and take a deeper dive into their financials.

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.

James J. McCombie owns shares in Anglo American. The Motley Fool UK has no position in any of the shares mentioned. 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

Market Movers

Why the Raspberry Pi share price is on everyone’s minds right now

Jon Smith reviews the 14% jump in the Raspberry Pi share price today as part of the successful IPO of…

Read more »

Rainbow foil balloon of the number two on pink background
Investing For Beginners

2 UK stocks that could do well out of the general election

Jon Smith runs the rule over two UK stocks that may benefit from higher spending on healthcare, consumer staples and…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Could this undervalued growth stock be the next big success story in US tech?

Shares of this US technology giant have collapsed almost 50% in 2024, but is the growth stock now an incredibly…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

After soaring 35% this year, is there still value in Barclays shares? Here’s what the charts say!

Barclays has been on a tear in 2024. But where does that leave investors considering buying some shares now? This…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

Nvidia stock has surged 3,450%. This UK investment trust owns loads!

Nvidia's recent amazing price surge has helped boost the value of this investment trust too as the chipmaker is its…

Read more »

Bronze bull and bear figurines
Investing Articles

After the general election what might happen to the FTSE 100?

Our writer’s been looking at the manifestos of the three main political parties to try and understand how the general…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

When will Shein hit the UK stock market and should I invest?

With Shein looking likely to list on the London stock market in 2024, this writer weighs up the case for…

Read more »

Investing Articles

Start supercharging passive income with REITs!

Are REITs the ultimate investment for boosting income generated from a portfolio? Zaven Boyrazian explores some of the most lucrative…

Read more »