I’m on the hunt for the best dividend shares to buy. Here are a few I think all savvy investors should consider.
Foresight Solar Fund
Renewable energy stocks like Foresight Solar Fund (LSE: FSFL) can be excellent picks for long-term income. On the downside, earnings can suffer during unfavourable weather conditions when energy production drops. But these companies enjoy plenty of other qualities that can make them reliable dividend payers.
Electricity demand is famously stable over time, so earnings and cash flow pressures don’t (unlike with many other dividend stocks) materialise during economic downturns. What’s more, the majority of Foresight’s energy is sold at pre-agreed rates under power purchase agreements, or backed by government subsidies.
These qualities have allowed the fund to raise annual dividends each year since it listed in 2013. And it’s set to raise the payout again to 8.1p per share in 2025, according to City analysts.
This leaves the business with a 10.8% dividend yield. And encouragingly, the targeted dividend is covered 1.3 times by expected cash, which is reasonably strong relative to the broader sector.
iShares US Equity High Income ETF
Pooled instruments like the iShares US Equity High Income ETF (LSE:INCU) can also provide a reliable second income over time. Spreading investors’ capital means many different dividend-paying shares contribute to the overall payout, protecting returns if one or two run into difficulties.
This particular one holds shares in 223 different Wall Street companies, spread across sectors such as information technology, financial services, telecoms and consumer goods. With a large number of multinational businesses in its basket too, it safeguards dividends from trouble in particular regions.
It’s true that a focus on equities leaves the exchange-traded fund (ETF) vulnerable to stock market downturns. But a selection of fixed income securities helps reduce this threat to the fund’s value.
In addition, its portfolio allocation is designed to “to generate income and capital growth with lower volatility than the broader US equity market”. The forward dividend yield here is 9.6%.
Phoenix Group
Financial services ace Phoenix Group‘s (LSE:PHNX) also proved a dependable dividend raiser in recent years. With another yearly hike tipped for 2025, its forward yield is an excellent 9%.
As with any share, the FTSE 100 company isn’t risk free. In this case, a economic downturn could pull its share price lower. But from a dividend perspective things look largely secure in my book. Its Solvency II capital ratio was a robust 175% as of June.
Phoenix’s operations are highly cash generative, which underpin its solid dividend record. It primarily manages old pension and insurance policies, which provide predictable cash flows over time from premiums and investment returns. With limited scope to grow earnings too, Phoenix is happy to return excess cash to its shareholders than to invest in the business.
Having said that, I’m confident steady structural growth in the retirement products market should underpin impressive dividend income over the long term.
