Many dividend investors have had their fingers severely burned into 2020. Companies have been slashing, postponing or axing payouts from UK shares left, right, and centre. Even traditional dividend heroes like BP continue to tear up their generous dividend policies in the wake of the Covid-19 crisis.
It’s clear that investors in UK shares need to be extremely careful. The economic consequences of the coronavirus are clearly severe and more companies could cut — or in some cases cut again — their dividends should the outlook remain uncertain and pressure on corporate balance sheets persist.
That’s not to say that you and I should stop buying UK shares, though. Indeed, there are still plenty of brilliant dividend stocks to choose from today despite the Covid-19 outbreak. And following the 2020 stock market crash many of these income heroes are just too cheap to miss.
8% dividend yields!
Direct Line Insurance Group is a great pick for even the most nervous investors. Things like home, pet and especially car insurance are some of the last things we stop buying during economic downturns. It’s one of the reasons why this FTSE 250 insurer felt confident enough to reinstate dividends last week. Direct Line carries an 8.5% dividend yield and trades on an undemanding forward price-to-earnings (P/E) ratio of 14 times.
UK shares like GlaxoSmithKline are also heroes for nervous investors in tough times like these. We need medicines and medical services, whatever economic storms are raging outside our windows. But this is not the only reason I’d buy this FTSE 100 giant. I’m also encouraged by the rate at which sales of its new medicines are growing and the strength of its pipeline. Second-quarter financials revealed it now has 35 medicines and 15 vaccines in development. Today Glaxo trades on a P/E ratio of 13 times for 2020 and carries a bulky 5% dividend yield.
Want to get rich with UK shares?
Value investors should also consider buying PayPoint today. This UK share trades on an even-cheaper forward P/E ratio of 12 times. Meanwhile its dividend yield for this fiscal year sits at a fatty 7.5%. Trading at the business (which provides retail terminals to convenience stores) has been thrown off course recently. But this was because the number of customers going into shops to pay their bills suffered as lockdown measures came into force. In truth, the future remains extremely bright for this FTSE 250 share as adoption of its PayPoint One terminals rips higher. And it creates boatloads of cash with which to keep its generous dividend policy rolling.
So don’t stop buying UK shares today. As these dividend stocks show, there are many terrific stocks that are simply good to miss following the stock market crash. What’s more, experts like those at the The Motley Fool can help you identify these share market stars through their vast library of special reports.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and PayPoint. 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.