I’m searching for the best dividend stocks to buy for 2023. Here are two that Hargreaves Lansdown investors like at the moment.
9.3% dividend yield!
Glencore (LSE: GLEN) sits at the top of the list of most popular stocks with Hargreaves Lansdown investors. The mining business has accounted for 1.55% of all buy orders during the last seven days.
Its share price has soared 61% during the past 12 months. This leaves it trading on a price-to-earnings (P/E) ratio of 5.9 times for next year. It also carries a market-beating 9.3% dividend yield at current prices.
Encouragingly for dividend investors the predicted dividend is covered two times over by anticipated earnings. This gives a wide margin of safety in case profits come in lower than expected.
Watch for the supercycle
Cyclical shares like commodities producers could fall in 2023 if the global economy tanks. Weak growth translates into lower demand for raw materials. But I believe Glencore’s rock-bottom valuation reflects this possibility.
In fact, signs that China is loosening Covid-19 restrictions are a good omen for mining businesses for next year. The Asian economic powerhouse accounts for around 70% and 50% of the world’s iron ore and copper alone.
I think metals and energy producer and trader Glencore could be a great investment for the long term too. The world looks set for a fresh commodities supercycle driven by the transition to green energy and urbanisation in emerging markets.
A soaring oil stock
BP (LSE: BP) is another FTSE 100-quoted commodities producer popular with Hargreaves Lansdown clients today.
In the past week it’s accounted for 1.07% of buy orders on the brokerage’s platform. That puts it third on the list of most popular stocks.
At first glance I can understand why demand for BP shares is so strong. The oil major trades on a forward P/E ratio of 5.6 times for 2023. Its 4.3% corresponding dividend yield meanwhile trounces the 3.6% average for FTSE index shares.
The expected dividend next year is also covered 3.5 times by projected earnings.
Uncertain outlook
BP’s share price has risen more than 40% during the past 12 months. High oil and gas prices have driven it higher on supply fears following Russia’s invasion of Ukraine.
Recent news suggests that fossil fuel prices could remain supported into 2023 too. A ceasefire in Eastern Europe isn’t expected in the near future. Meanwhile the OPEC+ group of countries (which includes Russia) continues to defy calls to cut production.
That said, a bleak outlook for the UK economy suggests oil prices could still reverse sharply in 2023. I worry about the profits outlook for BP over the longer term as demand for renewable energy sources heats up. Consultancy McKinsey & Co believes global oil demand will begin to decline as soon as 2026.
As a result I’d rather buy other FTSE 100 dividend stocks, including Glencore, today.
