Buying dividend shares can be a great way to grow one’s Individual Savings Account (ISA).
The cash rewards from high-yield dividend stocks can be used to buy lots more shares. This in turn can lead to exponential potential growth over time thanks to the mathematical miracle of compounding.
With this in mind, here are two top dividend shares I think are worth serious consideration.
Should you invest £1,000 in Lloyds Banking Group 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 Lloyds Banking Group made the list?
The PRS REIT
Dividends from share investing can fluctuate wildly according to broader economic conditions. So given the uncertain outlook for 2025, now could be the time to consider buying dividend payers in defensive sectors.
The PRS REIT (LSE:PRSR) is one stock that could prove a wise buy. As a major build-to-rent specialist — it has more than 5,400 residential homes on its books — rent collection remains stable at all points of the economic cycle.
Furthermore, Britain’s ongoing housing shortage means it doesn’t have to seriously worry about falling occupancy that would impact profits.
There’s another good reason I think the firm’s an attractive dividend share to consider. Under real estate investment trust (REIT) regulations, it must pay a minimum of 90% of annual profits from its rental activities out in the form of dividends. This is in exchange for certain tax breaks.
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.
For this financial year (to June 2025), PRS REIT offers a 4% dividend yield. This is ahead of the 3.6% and 3.4% averages for the FTSE 100 and FTSE 250 indexes respectively.
And for financial 2026, predictions of dividend growth drive the yield to 4.2%.
Not even residential property stocks are completely risk free. A particular problem for PRS REIT could be if interest rates remain at or around current levels, dampening asset values and impacting borrowing costs.
But on balance, I think the FTSE 250 company is worth a close look.
Pan African Resources
A bright outlook for gold prices means Pan African Resources (LSE:PAF) also demands serious attention, in my opinion.
In sterling terms, gold struck fresh record highs last week. On a US dollar basis it also reached new multi-week peaks. I believe prices are likely to continue climbing as macroeconomic and geopolitical worries — exacerbated by US President Trump’s words on trade tariffs and foreign policy — drive demand for safe-haven assets.
Investors have a multitude of UK precious metal stocks to choose from to capitalise on this. Those seeking dividends may wish to consider Pan African Resources, a mid-tier gold supplier in South Africa.
Predicted dividend growth over the short term means the miner’s dividends are a chunky 4.4% and 7.7% for the next two financial years (to June 2025 and 2026).
Of course there’s no guarantee that gold prices will continue rising. They could fall for a variety of reasons, for instance if the US dollar strengthens or the economic landscape improves.
Yet even if these affect Pan African’s earnings, the business still looks in good shape to pay those large predicted dividends. Payouts are covered between 3.1 times and 3.9 times by anticipated profits, comfortably above the safety benchmark of two times and above.
