2 top dividend shares to consider buying in December

When it comes to passive income in December, Stephen Wright’s targeting shares in companies focused on paying dividends to investors.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A front-view shot of a multi-ethnic family with two children walking down a city street on a cold December night.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There are many stocks that pay dividends. Strictly, the likes of Microsoft and Experian count as dividend shares. But I would suggest investors looking for passive income shouldn’t spend much time looking at either. 

Both could turn out to be brilliant investments – as they have been in the past. But the best dividend shares, in my view, are the ones that actively look to return cash to shareholders. 

Chord Energy

Chord Energy‘s (NASDAQ:CHRD) is a good example. Its balance sheet is in a strong position and this means the company has committed to returning 75% of its free cash to investors. 

One of the reasons billionaire investor Warren Buffett likes Occidental Petroleum is that the company doesn’t burn cash on expensive exploration projects. Instead, it distributes it to shareholders. 

Chord’s operations are mostly situated in the western US’s Williston Basin. This means its extraction costs are likely to be higher than Occidental’s, which is based in the southwestern US’s Permian Basin. 

That’s the biggest risk with the business. It means changes in the price of oil – especially downwards – are likely to have a much larger effect on the firm’s profits and dividends.

Investors that don’t have a positive view on oil prices should probably avoid buying shares in Chord – or any other oil producer. But I think the long-term picture’s encouraging.

Given this, I think the stock could be a great source of passive income. I bought shares in November and intend to add to my investment in December. 

Primary Health Properties

Primary Health Properties (LSE:PHP) is another company I’m buying and that’s literally designed to return cash to shareholders. It’s a real estate investment trust (REIT) that owns and leases GP offices. 

As an asset class, REITs originated in the US in the 1960’s. Their aim was to allow ordinary people to participate in (what was then) a booming property market.

In general, REITs make money by leasing properties to tenants. And in exchange for tax exemption, they are required to distribute 90% of their profits to shareholders as dividends.

That can make them a reliable source of income. And this is especially true with Primary Health Properties, which maintains high occupancy levels from the NHS. 

This limits the risk of a rent default, but there’s a significant risk. Not being able to retain its cash means growth has to be financed with debt and that shows up on the firm’s balance sheet.

The danger of Primary Health Properties having to issue shares is one to take seriously. But with a dividend yield of over 7%, that’s a risk I’m willing to take at today’s prices.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Passive income

Growth-focused businesses can be great passive income investments. But I think some of the best opportunities right now are in companies that look to distribute their cash to shareholders. 

Chord Energy and Primary Health Properties are two examples of this. And while they’re not the most well-known stocks, they’re my top dividend opportunities for December.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stephen Wright has positions in Chord Energy and Primary Health Properties Plc. The Motley Fool UK has recommended Experian Plc, Microsoft, Occidental Petroleum, and Primary Health Properties Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »