Dividend shares are popular at the moment and it’s easy to see why. In today’s choppy market (and cost-of-living crisis), regular cash income is worth its weight in gold.
Here, I’m going to highlight three dividend stocks for UK investors to consider as we start March. I think these shares are worth a closer look right now.
A stable dividend stock
Let’s start with Tesco (LSE: TSCO). It’s a favourite among income investors.
In my view, Tesco shares have considerable appeal from a dividend investing perspective at present.
For starters, the yield is attractive. Currently, analysts expect the group to pay out 10.7p in dividends for the year ended 26 February. That equates to a yield of around 4.3%.
Secondly, dividend cover is solid at around two times. This suggests that investors are unlikely to face a dividend cut. It’s worth noting that Tesco recently raised its H1 payout by 20.3%.
Third, Tesco shares are quite ‘defensive’ in nature. Given the current level of economic uncertainty, I think owning a few defensive stocks is smart.
Of course, the shares are not without risk. Higher costs and competition from Aldi and Lidl could hit profits.
I like the risk/reward skew though.
Rising payout
Next up is St. James’ Place (LSE: STJ). It’s the UK’s largest wealth management company.
Earlier this week, St. James’ Place published its full-year results for 2022. For the year, it declared a dividend of 52.78p per share (versus 51.96p the year before). That equates to a yield of around 4.1% at the current share price.
One thing this company has going for it right now is the complexity of the financial environment. Stock market volatility, inflation, rising mortgage rates, tax changes…These kinds of issues should boost demand for expert wealth management services.
It remains clear to us that the demand for trusted, face-to-face advice is only getting stronger.
St. James’s Place
It’s worth noting that, like a lot of financial stocks, this one can be volatile at times. They have a beta of around 1.6 which means that for every 1% move in the broader UK market (up or down), they move around 1.6%.
In the long run, however, the share price should climb higher as assets under management and profits expand.
A tech stock with a dividend
Finally, take a look at Softcat (LSE: SCT). It’s a technology company that helps businesses and government organisations get their IT up to speed.
Softcat doesn’t have the highest yield around. Currently, the forward-looking yield here is around 3%.
I don’t see this as a deal-breaker, however. This is a stock that has the potential to provide high total returns (capital gains plus dividends). In the years ahead, the company’s revenues and earnings should rise as organisations move to transform themselves digitally and embrace cloud computing, cybersecurity, and AI. This should push its share price up.
The risk here is that tech stocks could remain out of favour in the short term while interest rates are rising.
Taking a long-term view, however, I see a lot of investment appeal.
