The Motley Fool

Why HSBC Holdings plc & Unilever plc are my top dividend stocks for 2018

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.

With few exceptions, the years since the financial crisis have been largely unforgiving for income-focused shareholders in the UK’s largest listed banks. However, nearly a decade on, several of these globe-spanning financial institutions are finally beginning to return to their big dividend ways of before the financial crisis.

And at the top of my list is HSBC (LSE: HSBA), which currently kicks off a 5.2% yield that is nicely complemented by a whopping $2bn share buyback programme that is nearly completed after being announced in June of last year.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Unlike peers such as Barclays or RBS that are still paying out miserly dividends, if any, HSBC is able to return gobs of cash to shareholders for several reasons that I believe will stand the bank in good stead for 2018 and beyond.

First up is a healthy capital position with a Q3 CET1 ratio of 14.6% that exceeds regulatory mandates and has enabled management to return excess capital to investors. The second is a strong position in Asia, a market that is rapidly growing and driving demand for the retail and commercial banking HSBC provides.

This, together with a more rapid cost-cutting programme than rivals, has helped push the bank’s regulatory return on equity (RoE) up to 8.2% through the first nine months of 2017. This is still far below the RoE banks were posting in the years before the financial crisis, but it’s still a healthy figure that is growing and is already well ahead of rivals.

With the bank’s capital position secure and margins rising, HSBC’s bumper dividend yield makes it one of my top FTSE dividend options for 2018.

A more traditional option

But for investors who are still rightly skittish about investing in UK financial institutions, I reckon Unilever (LSE: ULVR) may prove a more palatable income option. With the Anglo-Dutch giant’s stock price up over 23% in the past year, its dividend yield of 3% may not raise many eyebrows. But for more risk-averse investors, the consumer goods giant’s payouts looks to be about as safe as they come.

And on top of the company’s dividend yield, management is also returning cash to investors via a €5bn share buyback programme. It has just completed but is likely to resume in the future barring any attractive acquisition targets appearing. Furthermore, investors should expect another windfall soon. The company just sold its collection of spreads brands for €6.825bn and expects to return the net proceeds to shareholders.

Looking forward, I see good reason to expect Unilever’s income prowess to continue to grow as the firm’s management has set ambitious but achievable sales and margin growth targets that are already boosting cash flow.

A hefty chunk of this rising cash flow is wisely being spent on acquiring up-and-coming brands to add to its portfolio, but there is still plenty left over to fund increasing shareholder returns.

Unilever may not be an exciting stock, but the firm’s proven management team, strong global position and rising cash flow make it one of my top FTSE 100 income stocks of the new year.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended HSBC Holdings. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.