2 top dividend stocks to buy in September

With inflation on the rise, this Fool picks out two top dividend stocks he’d buy this month to combat rising rates.

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Surging inflation is continuing to cause global chaos. In the UK, official figures show that rates have now surpassed 10% and continue to spike to fresh highs. This means stagnant cash is losing value, so I’m searching for dividend stocks that can build a passive income stream to help me counter inflation.

Here are two I’m seriously considering purchasing this month.

Abrdn

The first stock I’m looking at is global investment firm Abrdn (LSE: ABDN). It’s seen over 40% wiped off its value so far this year. In the last 12 months, the Abrdn share price is down around 45%.

Despite this, I still think it could be a solid buy today.

Firstly, its main attraction is its monumental near-10% dividend yield. This isn’t inflation-beating. But it’s not far off. And therefore, this would offer me a good level of protection against rising rates.

Its latest update to shareholders wasn’t the most impressive. However, the moves the firm is making to return value to shareholders also look good to me.

There’s an initial £300m programme, including a £150m share buyback scheme.

The stock may struggle in the months ahead as investors are deterred from making investments. With the energy price cap also recently being raised, this will only magnify the issue.

However, as a source of passive income, I think Abrdn is a great buy. With a near-inflation dividend yield and the business placing an emphasis on improving this, I’d buy Abrdn shares today.

Legal & General

Another stock on my radar for this month is Legal & General (LSE: LGEN). The financial and insurance business is down around 8% over the past year. In 2022, it has plummeted by 18%.

Like Abrdn, the business has struggled as consumers have tightened their belts in the face of the rising cost of living.

However, with its fall comes a huge 9.5% dividend yield.

Legal & General is a well-known FTSE 100 business. By adding the stock to my portfolio, I’m getting a reputable brand for a beaten-down price.

It also recently posted a positive update for the first half of this year. Within the period, operating profit rose 8%, while earnings per share jumped by the same amount.

The business also had an interim dividend of 5.44p, up 5% from the year before. And to add to this, it highlighted its growing contribution toward its five-year ambitions programme. This includes a cumulative dividend ambition of potentially £5.9bn by 2024. And when searching for stocks that can create a stream of passive income for me, this is the sort of thing I want to see.

The business may face a rocky road ahead as some predict inflation could reach well over 15% come next year. And with spending already slowing, I expect to see this intensify as we head into 2023.

However, I’d still buy the stock today. As a strong brand with an impressive dividend plan, I think Legal & General would be a great addition to my portfolio in September.

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.

Charlie Keough has no position in any of the shares mentioned. 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.

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