Top UK dividend stocks pay some of the most generous yields in the world, but their reputation has slipped lately. After the Covid-19 crisis and stock market crash, UK dividend cuts and deferrals total more than £31bn. If you have £5k – or any sum – to invest right now, there are stop plenty of top stocks to choose from.
Many big FTSE 100 names have stopped their dividends, including Royal Dutch Shell, Aviva, ITV, RSA, and all the big banks. The result is that just 10 stocks now pay 55% of all UK dividends, according to AJ Bell.
This still leaves a third of the FTSE 100 paying dividends, with the index still likely to yield a solid 3.5% this year. That remains an attractive rate of return, at a time when you can barely get 1% on cash.
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You can secure an even higher rate of income by selecting some of the best paying UK dividend stocks of all. Any company that can stand by its dividend in troubled times like these must have a reasonably solid foundation.
Oil giant BP, tobacco firm British American Tobacco, miner Rio Tinto, pharmaceutical firm AstraZeneca, telecoms supplier Vodafone, and household goods specialist Unilever are now the top six biggest dividend stocks listed on the FTSE 100. This is where I would start my search for UK dividend stocks to build a rising passive income in retirement.
Rival oil major Royal Dutch Shell has dropped its dividend, but BP is standing by its payout. Right now, it yields an astonishing 8.97%. While no dividend is guaranteed, the rising oil price should boost the chances of BP maintaining its payout. Oil faces an uncertain future, as green concerns grow, but is till the mainstay of the global economy.
Top UK dividend stocks for income
Cigarette sales also face an uncertain future, as health-conscious Western smokers cut back and electronic alternatives meet regulatory resistance. Despite this, British American Tobacco continues to generate huge sales, and currently yields 6.61%. The overall market may be shrinking, but its share remains strong.
Mining giant Rio Tinto should see demand for its metals and minerals pick up when the global economy recovers, and has stood by its dividend throughout the crisis. Arguably, every investors should have exposure to the commodity sector, and this UK dividend stock yields a generous 6.62%.
The AstraZeneca share price is one of the few to grow strongly this year, as investors focus on health during the pandemic. Measured over five years, it has almost doubled, which partly explains why the yield is a relatively low 2.61%. It looks expensive, and I would prefer Vodafone and Unilever, which yield 5.76% and 4.65% respectively.
I particularly like Unilever, who share price has taken a hit this year, and trades at 19 times earnings, which is relatively low by its standards.
As ever, do your own research, and make sure any stock pick balances your existing holdings. There are still top UK dividend stocks out there, if you know where to look.
Harvey Jones 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 ITV. 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.