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 February!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
Hargreaves Lansdown
What it does: The British asset manager runs Stocks and Shares ISAs and SIPPs for UK retail and private investors
By Tom Rodgers. Hargreaves Lansdown (LSE:HL.) is showing solid dividend growth and now offers a chunky 5.5% yield. The share price has been beaten down over the last five years amid heavy competition from newer providers.
But the UK tax authority HMRC dealt its rivals a blow in December 2023, noting that fractional shares could not be held in tax-advantaged ISAs. This opens the door to improved market share.
Hargreaves Lansdown shares now look exceptionally cheap at a P/E ratio of just 11.
The immediate risks for the dividend stock come from an extended global downturn; earnings could fall if investors trade fewer shares.
However, while the share price is recovering, it has not yet caught up with much-improved earnings and profits, which jumped 50% to £402m last year. That gives Hargreaves Lansdown a price-to-earnings-growth ratio of 0.2, which implies great value on offer.
Tom Rodgers does not own shares in Hargreaves Lansdown.
ITV
What it does: ITV is a UK media company, offering TV broadcasting and streaming, plus content creation.
By Alan Oscroft. Don’t you love stocks that are suffering from some sort of cyclical downturn?
I do, and that’s why I like the look of ITV‘s (LSE:ITV) dividends right now, with advertising in a downturn these days. ITV’s November update spoke of “the challenging macro environment which is impacting the advertising market.“
The result? The ITV share price has fallen around 50% in five years. But it’s helped push the dividend yield up to 8.3%.
That’s the forecasts for 2023, with results due in 7 March. But brokers suggest the yield might dip a bit in 2024, and I do see a real risk of that.
It’s all about how soon we see interest rates coming down and people having a bit more cash to spend. And I don’t think that will happen overnight.
But on balance, I see a earnings growth in the next few years, and a long-term cash cow here.
Alan Oscroft has no position in ITV.
National Grid
What it does: National Grid is an energy company running regulated operations and networks in the UK and in North America.
By Kevin Godbold. National Grid (LSE: NG.) has a multi-year record of generally rising cash flow and dividends.
The utility company focuses on the transmission and distribution of electricity and gas. In the UK, it’s known for operating the high voltage network (or grid) for electricity and the high-pressure gas network for gas.
However, the firm also has energy distribution and other related business on both sides of the Atlantic. Meanwhile, its activities face close regulatory scrutiny. Debts are large because capital expenditure requirements are often high.
For shareholders, there’s some risk in the setup because the company needs to balance the servicing of debt against paying shareholder dividends. Nonetheless, for me, National Grid is worth consideration for a long-term diversified portfolio of dividend-driven stocks.
With the share price in the ballpark of 1,052p, the dividend yield is well above 5%. I see that level as attractive as we enter February.
Kevin Godbold does not own shares in National Grid.
