Best British dividend stocks to consider buying in October

Every month, we ask our freelance writers to share their top ideas for dividend stocks with you — here’s what they said for October!

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Barratt Developments

What it does: Barratt Developments, which builds homes across the UK, is the country’s largest housebuilder by volume.

By Royston Wild. Construction giant Barratt Developments (LSE:BDEV) doesn’t offer one of the FTSE 100’s biggest forward dividend yields.

In fact, at 3.3% for the financial year to June 2025, its yield sits below the index average of 3.5%. But City analysts expect dividends to rise rapidly over the short-to-medium term, which in turn drives the yield sharply higher.

For fiscal 2026 and 2027, the dividend yields on Barratt shares are 4.2% and 5% respectively.

Of course dividends are never guaranteed. And in this case, shareholder payouts could be endangered by a fresh downturn in the housing market.

Encouragingly, however, market conditions are steadily improving as mortgage rates become more affordable. Barratt’s weekly net private reservation rate per active outlet was 0.58 between 1 July and 25 August 2024, latest financials showed. This was up from 0.42 a year earlier.

Barratt also has a strong balance sheet it can utilise to pay dividends if the market stagnates or worsens again. Net cash was almost £870m as of June.

The builder’s shares have dropped around 10% in the last month. This makes it an attractive dip buy to consider, in my opinion.

Royston Wild owns shares in Barratt Developments.

Dunelm Group

What it does: Dunelm Group is a UK homewares retailer that sells bedding, curtains, furniture, mattresses, and more.

By Charlie Carman. Dunelm Group (LSE:DNLM) offers a 3.7% dividend yield. That’s slightly higher than the FTSE 250 average.

Crucially, shareholders have also been rewarded with special dividends in recent years. These aren’t reflected in the headline yield figure. Including this year’s additional payout brings the total yield closer to 6%. But remember, no dividends are guaranteed.

FY24 results were impressive. Revenues advanced to £1.71bn from £1.63bn in 2023. Pre-tax profits also climbed to £205.4m from £192.7m.

Moreover, the outlook seems bright. Widely-anticipated interest rate cuts could spur housing market activity. A rising number of residential movers should boost demand for home furnishing products. Christmas is often a strong trading period too.

Dunelm’s founders — the Adderley family — recently sold 10m shares. They remain the largest shareholders by a clear margin, but there’s a risk this could damage investor confidence.

Nonetheless, there are still good reasons to consider buying Dunelm shares in October. 

Charlie Carman does not own shares in Dunelm Group. 

M&G

What it does: M&G is an asset manager that has clients in the UK and multiple other markets worldwide

By Christopher Ruane. M&G (LSE: MNG) has offered a high yield for years now. But that does not make it any less attractive in my view.

Its policy aims to maintain or grow the dividend each year. Clearly, the asset manager understands the importance of the dividend to its investment case. September’s interim results saw the latest rise. It was modest, with the interim dividend going up from 6.5p per share to .6.6p. But a rise is still a rise and the current yield is 9.4%. That pits M&G among the most lucrative of FTSE 100 shares.

The first half of the year saw the business generate operating capital of £486m – a bit  less than in the same period last year, but still substantial. Its strong brand, large customer base and ongoing demand for asset management all work in M&G’s favour as a dividend share. Weak markets could dent demand and profits, but I plan to hold – and keep earning passive income.

Christopher Ruane owns shares in M&G.

Rio Tinto

What it does: Founded in 1873, this British-Australian multinational is the world’s second largest metals and mining corporation. Its prime product is iron ore, but it also produces copper, bauxite, diamonds, uranium and a series of industrial minerals.

By Harvey Jones. Times are tough for commodity stocks, and everybody knows why. China has been the world’s number one source of demand for years, consuming 60% of the world’s metals and minerals. But the world’s second biggest economy is on the rack and struggling to turn things round.

However, things are looking up as Beijing launches an aggressive new stimulus plan while US interest rate cuts could revive the wider global economy.

The Rio Tinto (LSE: RIO) share price is up 5% over 12 months but still looks good value with a forward price-to-earnings ratio of 9.97%. Its shares are forecast to yield 5.81% in the year ahead.

The big danger is that the latest Chinese stimulus plan will fail to shift the dial, and we’ll be back to square one.

However, with a dividend like this, Rio Tinto’s shares look like a no-brainer buy for investors with the patience to wait for better days.

Harvey Jones does not own shares in Rio Tinto.

TP ICAP

What it does: TP ICAP is a financial markets infrastructure company and operates as the world’s largest inter-dealer broker by revenue.

By Kevin Godbold. In August, TP ICAP (LSE: TCAP) released a positive set of half-year numbers for 2024. The outlook statement was upbeat and chief executive Nicolas Breteau said the firm’s focus on diversification “is paying off”.

The business facilitates transactions between financial institutions, and market volatility can lead to improved trading. One risk for shareholders is that markets may become quieter leading to lower cash flows and profits for the company.

We saw the risk play out leading up to the coronavirus. Earnings had been declining for a few years and the directors rebased the dividend lower in 2020.

Nevertheless, earnings and shareholder payments have been growing well since then. There’s also a share buyback programme in operation suggesting the firm has plenty of spare cash flowing in.

Meanwhile, with the share price near 234p, the forward-looking dividend yield for 2025 is just below 6.8%, which looks attractive to me.

Kevin Godbold does not own shares in TP ICAP.