Every month, we ask our freelance writers to share their top ideas for dividend stocks to buy with you — here’s what they said for June!
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Legal & General
What it does: Legal & General is a financial services company providing services across savings, retirement and life insurance.
What I particularly like about the company is that its dividend is well covered by earnings (1.6x to be precise).
Not only does this mean that the company has enough cash to sustain its current dividend, but it also gives management a bit of scope to potentially increase shareholder payouts in future.
And that’s exactly what the group did earlier this year when the board proposed a full-year dividend of 19.37p, up 5% on the back of a robust full-year performance.
I was also impressed that the group’s cash generation of £1.9bn was up 14%, which means that its balance sheet looks nice and healthy to me.
As such, combined with a whopping 8.4% yield, Legal & General gets my vote for the best British dividend stock for investors to consider in June.
Matthew Dumigan does not own shares in Legal & General.
What it does: Moneysupermarket.com operates price-comparison sites for insurance, money, home services, and other products.
The price-comparison habit is a habitual part of life for many consumers. And the company owns popular brands such as MoneySuperMarket, MoneySavingExpert, Quidco, Icelolly, Decision Tech and Travelsupermarket.
My guess is the business will keep on attracting customers to its sites. And the strong stream of cash flowing into the operation will likely continue.
City analysts are optimistic and have pencilled in double-digit percentage increases in earnings for this year and next. And although such estimates are not set in stone, the directors have been upbeat in their recent outlook statements.
There’s a stable, generally growing multi-year record of dividend payments. And shareholder payments continued right through the pandemic years.
I reckon that outcome demonstrates the ongoing strength of the enterprise.
Meanwhile, with the share price near 263p, the forward-looking dividend yield is attractive at almost 4.7% for 2024.
Kevin Godbold does not own shares in Moneysupermarket.com.
What it does: Topps Tiles owns 304 shops, three showrooms and six websites selling tiles to consumers and tradespeople.
Record-breaking revenue of £131m was reported during the 26 weeks to 1 April 2023. This suggests the company is on track to achieve its stated ambition of increasing its UK market share from 17% to 20%.
However, Topps Tiles is a small company — it has a market cap of £101m — which makes it vulnerable should there be an unexpected shock to the business. If there’s a downturn in earnings, the dividend will likely be the first thing to be cut. I also have concerns that it’s too reliant on physical stores. But the company claims 98% of its sales involve at least one visit to a shop.
Even so, with the UK economy expected to grow over the next couple of years, I think the dividend stock is well placed to deliver generous returns to shareholders.
James Beard does not own shares in Topps Tiles
What it does: Vesuvius produces equipment used to handle molten metal, mainly serving the steel and foundry industries.
Management says that customer demand has “started to recover” from the low levels seen at the end of last year.
Financially, the business looks in reasonably good health to me. My only worry is that inventories are a little higher than normal. That could be a problem if demand slumps again. However, the company says this situation is starting to improve.
Profits are expected to fall this year from last year’s record levels, but I think this is already priced in. Vesuvius shares trade on just nine times forecast earnings with an expected dividend yield of 5.4%.
This payout should be covered 1.9 times by earnings, so looks quite safe to me. I see Vesuvius as a good income opportunity for June.
Roland Head does not own shares in Vesuvius.