With interest rates on savings accounts still abysmally low, dividend stocks remain a solid option for those seeking higher returns from their money. With that in mind, here’s a look at five UK dividend stocks I’d buy for 2020 and beyond.
The first dividend stock I’d go for is Unilever, which owns a world-class portfolio of consumer goods brands including Dove, Lipton, and Domestos. It currently offers a prospective dividend yield of 3.1%.
The reason I like Unilever is that it’s a ‘sleep-well-at-night’ stock. Due to the nature of the group’s products (which are used by 2bn people worldwide every day), revenues and earnings are relatively consistent. I also like the fact that the group has significant exposure to the world’s emerging markets. This provides a long-term growth story.
ULVR shares currently trade on a forward-looking P/E of around 19.3. I think that’s fair for a company of its quality.
Next, I’d go for alcoholic beverages company Diageo, which owns a number of major brands including Johnnie Walker, Smirnoff, and Tanqueray. It currently offers a prospective dividend yield of 2.4%.
What I like about Diageo is that it has a brilliant dividend growth track record – it has now registered 21 consecutive dividend increases which is an excellent achievement. And like Unilever, it has considerable emerging markets exposure that should provide growth going forward.
DGE shares currently trade on a forward P/E of around 20.4. That’s an expensive valuation, but this company is worth a premium, in my view.
Legal & General
For high yield, I’d go for financial services group Legal & General. It currently offers a prospective yield of around 5.8%.
What appeals to me about Legal & General is that it’s a diversified business. Not only is the company the UK’s largest life insurer, but it’s also a major player in investment management (£1trn assets under management) and retirement solutions. This means that it has multiple revenue drivers. The company has also registered nine consecutive dividend increases now and is expected to keep lifting the payout in the years ahead.
LGEN shares currently trade on a forward P/E of just 9.5. I think that’s a steal.
Sticking with the financial services sector, I also like Prudential, which after its recent demerger with M&G, is now predominantly focused on the financial needs of those in Asia. The prospective yield on offer here is around 3%.
Prudential shares are a little out of favour right now due to the trade war between the US and China and the political demonstrations in Hong Kong. These issues could impact profits in the near term. However, from a long-term perspective, I see considerable growth potential here as wealth across Asia is expected to rise significantly over the next decade.
PRU’s forward P/E is just 8.7. I see that as a bargain.
Tritax Big Box
Finally, looking outside the FTSE 100, I like Tritax Big Box. It’s a property company that owns a portfolio of strategically-located warehouses that are let out to retailers. The prospective yield on offer here is an attractive 4.8%.
What I like about BBOX is that it’s well placed to benefit from the shift to online shopping. With more people shopping online, retailer demand for strategically-located warehouse space is rising rapidly.
Tritax shares currently trade on a forward-looking P/E ratio of around 20.5. At that valuation, I think the stock is attractive.
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Edward Sheldon owns shares in Unilever, Diageo, Prudential, Legal & General and Tritax Big Box. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Diageo, Prudential, and Tritax Big Box REIT. 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.