Should investors consider these 30 dividend stocks for their SIPP for ENORMOUS retirement income?

Zaven Boyrazian shares the growing list of British stocks hiking dividends for more than 20 years in a row that investors are rushing to add to their SIPPs.

| 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.

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.

A common strategy when investing in a Self-Invested Personal Pension (SIPP) is to focus on dividend-paying stocks. After all, these companies can provide a lucrative stream of passive income. And when combined with the State Pension, it can significantly improve a retirement lifestyle.

Sadly, actually finding quality dividend stocks to buy can often be a challenge. But there’s a bit of a cheat code used by many – Dividend Aristocrats.

Thanks to their relatively stable and reliable cash flows, Dividend Aristocrats are stocks that have systematically increased their dividend for at least 20 years. And the London Stock Exchange currently has 28 such enterprises to pick from, with two more (Ashtead Group and BlackRock Greater Europe Investment Trust) on the verge of joining this elite group.

Should you invest £1,000 in HSBC 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 HSBC made the list?

See the 6 stocks

Britain’s Dividend Aristocrats

  1. DCC
  2. Diageo
  3. Diploma (LSE:DPLM)
  4. Halma
  5. Sage Group
  6. Scottish Mortgage Investment Trust
  7. British American Tobacco
  8. Bunzl
  9. Croda International
  10. F&C Investment Trust
  11. Spirax Group
  12. BAE Systems
  13. Alliance Witan
  14. Caledonia Investments
  15. City of London Investment Trust
  16. Cranswick
  17. Merchants Trust
  18. Murray Income Trust
  19. Global Smaller Companies Trust
  20. Bankers Investment Trust
  21. Derwent London
  22. Primary Health
  23. Scottish American Investment Company
  24. Spectris
  25. Rotork
  26. BlackRock Smaller Companies Trust
  27. Clarkson
  28. Henderson Smaller Companies Investment Trust

These businesses are operating across a variety of industries and economies. That’s great news for portfolio diversification. But what about yield?

With dividends constantly being hiked, surely the payout’s going to be impressive? Well, the average yield of these stocks is actually just 2.9%. With Aristocrats known for their dividend-hiking abilities, a lot of these shares trade at a premium valuation, resulting in unimpressive payouts.

Of course, this may only be temporary. After all, if the companies continue to boost dividends, the yield will naturally rise over time. Unfortunately, investors may be waiting for quite some time.

These companies aren’t keen on losing their aristocratic status. As such, a common tactic is to just increase payments by a tiny amount each year. Consequently, the average dividend growth rate among these firms is only 5.3%.

Investing in the best

Buying the entire FTSE Aristocrat basket can unlock a relatively reliable passive income stream for me. But most of us won’t have the cash for all of them. And to be honest, that stream isn’t likely to grow very fast, only slightly staying ahead of inflation. Yet there are a few exceptions, such as Diploma.

Today, the stock yields only 1.35%. But its growth rate is closer to 15%. And if management can maintain this level of expansion, it may only be a few years before the yield becomes far more meaningful – potentially even extending into double-digit territory.

Since Diploma operates at the heart of other businesses’ complex supply chains, demand for its services isn’t likely to disappear any time soon. In fact, its role as a value-added distributor continues to become increasingly essential, giving the stock plenty of longevity for future rate hikes.

Of course, it’s not a risk-free enterprise. The stock does have some fierce competition and is exposed to the risk of supply chain disruptions preventing order fulfilment to customers. But it may be worth considering taking these risks given the group’s impressive dividend potential. And it’s not the only Aristocrat worthy of a closer inspection as a potential addition to a SIPP portfolio.

Should you buy HSBC now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended BAE Systems, British American Tobacco P.l.c., Bunzl Plc, Clarkson Plc, Croda International Plc, Diageo Plc, Diploma Plc, Halma Plc, Primary Health Properties Plc, Rotork Plc, Sage Group Plc, and Spectris 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

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is the rare dip in this FTSE powerhouse’s share price just the right time for investors to consider buying it?

This FTSE 100 banking giant has seen its price tumble following the US tariffs news, but could the rare dip…

Read more »

Investing Articles

After an 18% fall, is Rolls-Royce’s share price now just too cheap for me to ignore?

Rolls-Royce’s share price was caught in the recent FTSE 100 sell-off. But now might be the time for me to…

Read more »

Investing Articles

11% yield! Could this UK stock  be a huge opportunity for investors targeting a second income?

An double-digit dividend yield could be second-income buying opportunity if the stock market is underestimating this UK translation company. 

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

This FTSE 250 REIT’s been unaffected by Trump’s tariffs. And it’s yielding 8.3%

Our writer’s found a FTSE 250 real estate investment trust that hasn’t been caught in the fallout from ‘Liberation Day’.…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Dividend Shares

Blimey, what’s happened to the Barclays share price?

After hitting a 15-year high at the end of February, the Barclays share price has plunged in the past two…

Read more »

Dividend Shares

On 8.6 times earnings and a cash yield of 9%, this FTSE 250 share seems too cheap

It's been a rough week or so for UK shareholders, with the FTSE 100 and FTSE 250 both plunging. Yet…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

Here’s why I just bought this gold stocks fund for my SIPP!

I think investing in gold stocks could be the best way to capitalise on bullion's bull run. Here's a top…

Read more »

Investing Articles

How much passive income an investor could earn if they put £250 a month in an ISA at 40

Harvey Jones shows how small, regular investments can flourish into a generous passive income to secure a comfortable retirement years…

Read more »