Personally, I reckon the best dividend shares have excellent future-proof prospects. I try to look past high yields on offer today. In most cases, the stocks offering these higher yields may have a mixed record of payout or the yield could be a sign of trouble. However, this isn’t always the case. Deep research and due diligence is needed to come to a conclusion.
I prefer consistency of returns, as well as keeping one eye on the future to ensure any business in question can continue to help me build wealth.
Two stocks that fit my criteria, and I’d love to buy as soon as I can, are Unilever (LSE: ULVR) and BAE Systems (LSE: BA.). Here’s why!
Unilever
The consumer goods mammoth doesn’t really need an introduction. However, for the uninitiated, there’s a good chance you’ve purchased and used one of the firm’s many foodstuffs, hygiene, or cleaning products.
Despite my bullish stance on the stock, there are risks involved. The biggest one for me is the premium nature of Unilever’s brands. A rise in non-branded essential ranges introduced by supermarkets have given consumers looking to get more bang for their buck an alternative. This could result in performance and earnings issues for Unilever, and this could hurt returns.
On the other side of the coin, Unilever’s immense brand power and worldwide reach is hard to ignore. Furthermore, it has a great track record of performance and shareholder returns. However, I do understand that past performance is not a guarantee of the future. Plus, many of its products are essentials, including food items, hence, this gives the business an element of defensive ability. After all, we all need to eat.
Finally, from a fundamentals view, a dividend yield of 3.4% isn’t the highest, but still attractive. As I said earlier, I’m more concerned about consistent returns, as well as future-proof prospects. However, it’s worth remembering that dividends are never guaranteed.
BAE Systems
As one of the world’s biggest defence firm’s in the world, business has been good in recent times.
However, an increased number of conflicts doesn’t sit well with me personally, and I’m praying for a speedy resolution everywhere. It’s worth remembering that defence spending isn’t just missiles and tanks, it covers much more. A prime example is cybersecurity, which is crucial in the technology-driven world we find ourselves in.
The natural risk is that all conflicts immediately cease, hurting BAE’s performance and earnings. In addition to this, as with any product-based business, if something were to fail or malfunction, there could be untold damage to earnings, investor sentiment, and reputation.
Moving to the other side of the coin, BAE looks like it can capitalise on a burgeoning market. Statista reports that defence spending has never been higher. The existing relationships BAE possesses, and the wide span of its operations, could result in BAE’s earnings climbing and the returns flowing.
Speaking of returns, a dividend yield of 2.4% may not stand out instantly as one that could make me rich. However, the draw for me is the strong order book that could boost the coffers, an already healthy balance sheet, and a potentially lucrative market that continues to grow. These aspects could all support shareholder returns for years to come.
