Every month, we ask our freelance writers to share their top ideas for dividend stocks with you — here’s what they said for June!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
IG Group
What it does: IG Group is a global fintech company providing online trading platforms and related educational resources.
By Kevin Godbold. The dividend record for IG Group (LSE: IGG) is stable with zero cuts since at least as far back as 2018. The company even maintained the pay-out through the pandemic. Meanwhile, the compound annual growth rate (CAGR) of the dividend is running at about 0.91%.
With the shares near 802p (20 May), the forward-looking yield is just under 6% for the trading year to May 2025.
The firm has been diversifying and expanding its operations. However, the performance of the business tends to improve with market volatility — when people often trade the markets more. So, there’s some cyclical risk here for shareholders.
Nevertheless, in March the company reported stable revenue year on year, “despite the lowest level of volatility in over five years”.
The trading and financial stability of the enterprise is encouraging, and I’d consider the stock for inclusion in a diversified portfolio of dividend shares.
Kevin Godbold does not own shares in IG Group.
ITV
What it does: ITV is the UK’s largest commercial broadcaster. It also operates a programme production business, ITV Studios.
By Roland Head. ITV (LSE: ITV) has been out of favour with investors for a long time, but I think the tide is starting to turn.
After a tough slump in advertising last year, ITV recently reported a 3% increase in first-quarter ad revenue. Management expects a 12% increase during the second quarter, helped by EURO 2024 football.
ITV also revealed that it has erased the deficit on its large pension scheme, which is now in surplus. No more extra cash contributions are needed, removing a big drag on cash flow.
The risk is that ITV remains a legacy business that’s not big enough to compete with the big streamers.
Personally, I don’t buy this view. ITV has a 33% share of commercial broadcast viewing in the UK and also makes programmes for the big streamers, including in the US.
I think ITV’s dividend now looks safe, giving a 6.4% yield with the potential for growth.
Roland Head owns shares in ITV.
Legal & General
What it does: Legal & General offers retirement, wealth, insurance, investment management and capital investment solutions.
By Andrew Mackie. A recent uptick in the Legal & General share price (LSE:LGEN) means that the dividend yield is not quite as attractive as it was a month ago. However, with a forward yield of 8.4%, I continue to accumulate shares in the company on a regular basis.
The key to dividend investing is sustainability. Between 2020-2023, net capital surplus generation has been £800m higher than total dividends payouts. It comfortably expects this trend to continue in FY24. Over the longer term, I remain confident that shareholder returns will remain a key tenet of its strategy.
One of the most exciting growth areas for the business is pension risk transfer (PRT). Companies turn to L&G to derisk their defined benefit pension plans. It estimates that only 10% of such pension liabilities have been transacted on to date.
A key risk for the business today remains interest rates. The longer rates remain elevated, the greater the risk that the value of its vast property and bond portfolios get re-rated, thereby impacting profitability. But I take a long term view when investing, and I remain confident in its ability to weather any economic downturn, just like it has done multiple times in the past.
Andrew Mackie owns shares in Legal & General.
Tritax EuroBox
What it does: Tritax EuroBox invests in and manages logistics real estate in Continental Europe.
By Paul Summers: So long as I’m willing to take on (arguably) more risk, I think the dividend stream from warehouse owner and manager Tritax EuroBox (LSE: EBOX) looks very attractive.
The forecast yield currently stands at 7.2%. There aren’t many stocks offering more in the UK market.
While income is the primary focus here, I’m also positive about this real estate investment trust’s ability to deliver a nice capital gain in time, given the high likelihood that online shopping will continue growing in popularity. This means more demand from retailers to rent the sort of ‘big boxes’ it owns.
My chief concern is how long we must wait for interest rate cuts to arrive. Like anything property-related, Eurobox shares have been out of fashion in recent years and I imagine many of its investors are growing impatient.
Staying diversified remains vital, in my view.
Paul Summers has no position in Tritax EuroBox
