The London stock market is a prime spot to find top dividend growth stocks. And the outlook for many passive income shares has improved following this month’s general election.
Iain Snedden, senior investment specialist at Aegon Asset Management, has identified housebuilding and clean energy as two areas that could benefit in the coming months. Incidentally, these sectors have been happy hunting grounds for dividend investors in years gone by.
But which stocks in these industries could be good investments? Here are two I think are worth serious consideration today.
Soaring dividends
Solving Britain’s housing crisis is a clear priority for new Prime Minister Keir Starmer. It’s a good omen for construction companies going forwards.
Snedden says that “Labour campaigned heavily on housing, pledging to overhaul the planning system that has stymied homebuilding numbers. With a target of 1.5 million homes to be built in England over the parliament, this is a clear positive for housebuilders.”
Vistry Group (LSE:VTY) may be one of the standout performers looking ahead. This is thanks to its focus on the affordable homes segment, one where shortages are especially pronounced.
At first, Vistry may appear a strange pick for a piece on dividend growth stocks. Annual payouts have fallen twice since the pandemic, and were axed entirely in 2023 as the builder prioritised share buybacks.
However, City analysts expect dividends to return this year, and to grow sharply over the short term. This is shown in the table below.
| Year | Dividend per share | Dividend growth | Dividend yield |
|---|---|---|---|
| 2024 | 47.2p | – | 3.6% |
| 2025 | 69.3p | 47% | 5.2% |
| 2026 | 85.7p | 24% | 6.5% |
As we can see, yields eventually also storm above the FTSE 100 average of 3.6% from next year.
Of course dividends are never guaranteed. And Vistry’s dividend forecasts could crumble if the homes market suffers another downturn.
But improving housing demand — and the possibility of further boosts if, as expected, interest rates fall — suggests dividends could indeed return with a bang in the next few years.
7%+ yields
As I mentioned, Snedden has also identified green energy stocks as potential winners from a Labour government.
He says that “by removing regulations that have constituted a de facto ban on new onshore wind developments since 2017, the government hopes to match other European nations, which have been adding large amounts of onshore wind capacity in recent years.”
The Renewables Infrastructure Group (LSE:TRIG) could be a big beneficiary of these changes. Its wide European portfolio — which covers the wind, solar, and battery storage segments — includes a variety of assets in the UK.
Like Vistry, the business is also tipped to pay a large and growing dividend for the foreseeable future, as shown in the table below.
| Year | Dividend per share | Dividend growth | Dividend yield |
|---|---|---|---|
| 2024 | 7.49p | 4% | 7.6% |
| 2025 | 7.65p | 2% | 7.7% |
| 2026 | 7.82p | 2% | 7.8% |
I believe Renewables Infrastructure Group may be one of the ‘safest’ dividend stocks out there. To repeat myself, shareholder payouts are not a certainty. And earnings here could suffer if interest rates remain around current elevated levels.
But the company has a great long-term track record, supported by its defensive operations and strong cash flows. Dividends could rise strongly too as demand for clean energy takes off.
