Every month, we ask our freelance writers to share their top ideas for dividend stocks with you — here’s what they said for December!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
Diageo
What it does: Diageo sells some of the world’s most popular alcoholic beverages including Guinness, Baileys and Smirnoff.
Should you invest £1,000 in Kainos right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Kainos made the list?
By Royston Wild. Drinks giant Diageo (LSE:DGE) doesn’t have the largest dividend yield out there. For this financial year (to June 2025), it sits at a healthy-if-unspectacular 3.7%.
This is roughly in line with the FTSE 100 average.
However, the Captain Morgan maker is still a dividend legend, having raised the annual dividend for more than 25 years on the spin. And I think it’s a top blue chip to consider following fresh share price weakness.
Diageo’s share price has dropped more than 10% in the past month. And so it’s down 17% since the start of 2024.
Beverages-related spending has disappointed across much of the sector of late. For Diageo, conditions in Latin America and the Caribbean have been especially tough.
However, the Footsie firm has a knack of bouncing back from such troubles. And I’m confident it’ll repeat the trick, supported by its heavyweight stable of brands, its expertise in innovation, and its exposure to fast-growing emerging markets.
Royston Wild owns shares in Diageo.
M&G
What it does: M&G is a UK-based asset manager with a retail and institutional client base spread across a variety of global markets
By Christopher Ruane. The past half year has been poor for the M&G (LSE:MNG) share price. After getting close to £2.40 in March, it subsequently fell and has lately been hovering around the £2 mark, 11% below where it started the year.
But a lower share price equals a higher dividend yield. An increase in the recent interim dividend also helped. At 1.5%, it was modest. But management is delivering its aim maintaining or increasing the payout per share each year.
Taken together, that means the FTSE 100 financial services company now offers shareholders a yield of 9.9%.
Such a high yield can signal City nervousness. The first half saw clients take out more money than they put in (excluding in the firm’s Heritage business). If that continues – for example because of fears about market performance – M&G earnings could fall.
As a long-term investor, though, I like the firm’s strong brand, large customer base and proven cash generation potential.
Christopher Ruane owns shares in M&G.
Primary Health Properties
What it does: A real estate investment trust (REIT) specialising in the ownership and management of healthcare facilities.
By Mark David Hartley. Like many shares, Primary Health Properties (LSE: PHP) suffered short-term losses following the tax-heavy Autumn budget. The shares declined 6% in October, erasing a summer of gains. Still, dividends remain consistent, with the 7.8% yield rewarding loyal shareholders. As a REIT, it’s required to return 90% of taxable income as dividends, often assuring a solid dividend track record. That makes it a great option for an income portfolio with a long-term view.
The trade-off is that if the REIT funnels most pre-tax earnings into business development, the dividend payout ratio can be low. This can happen during difficult economic periods when the realty industry often struggles. During periods of high inflation, limited property investment can stifle demand and hurt the share price, as evident during Covid. Still, as part of a long-term portfolio to earn consistent dividend income, I think it’s one of the most reliable REITs on the FTSE 250.
Mark David Hartley owns shares in Primary Health Properties.
Supermarket Income REIT
What it does: Supermarket Income REIT invests in diversified supermarket real estate in the United Kingdom.
By Alan Oscroft. The Supermarket Income REIT (LSE: SUPR) share price has tumbled in the past couple of years, pushing its forecast dividend yield up to 8.8%. Forecasts show the dividend growing, albeit slowly, over the next couple of years.
The pains of inflation and property market weakness have turned investors away from the trust. But we see a net asset value per share of around 89p, so the shares are on a discount to that.
At FY results time in September, chair Nick Hewson said the board is “focused on delivering a progressive dividend for shareholders.“
The dividend cash comes ultimately from food sales, and that must be about as defensive a business as you can get.
The company does have net debt, which could put pressure on future dividends. And stubborn inflation could mean more short-term share price volatility.
But I can’t see the combination of food plus real estate rental being anything other than a long-term cash cow.
Alan Oscroft has no position in Supermarket Income REIT
Taylor Wimpey
What it does: FTSE 100-listed Taylor Wimpey is one of the UK’s largest housebuilders.
By Paul Summers. Taylor Wimpey (LSE: TW.) shares have slumped in the last few weeks. This is despite the company stating that it had seen “steady signs of improvement in customer demand” over H2 so far.
The catalyst appears to be fears of an inflation bounce brought about by Government spending plans. The latter is believed to be so large that the Bank of England may be forced to slow the pace of interest rate cuts in 2025.
Such a move would be far from ideal for the housing market. On the other hand, I think a lot of this is now priced in and new investors are offered an attractive entry point.
Taylor Wimpey’s dividend yield also stands at over 7% (as I type). Yes, there’s a risk this will be reduced if trading weakens. But what remains might still be more than I’d get elsewhere in the FTSE 100.
Paul Summers has no position in Taylor Wimpey
