Every week, Hargreaves Lansdown publishes a list of the most bought stocks on its platform in the prior week. This list can be a useful source of investment ideas.
With that in mind, I’m going to look at three UK dividend stocks that Hargreaves Lansdown investors bought last week. Should you buy these dividend payers too?
Oil major
The most bought dividend stock on Hargreaves Lansdown last was oil major BP (LSE: BP). It was actually the third most purchased stock overall.
This isn’t a stock I’d rush out to buy right now. One reason is the company has just kicked off a huge transformation programme to transition itself into a renewable energy company. This is a good thing. Yet, realistically, this transformation isn’t going to be easy. There are likely to be setbacks along the way. The costs of the transition could impact the company’s ability to pay dividends.
Another reason I’d leave BP shares alone for now is the company just cut its dividend substantially, resetting its payout to 5.25c per quarter. After a company has just cut its payout, you have to be careful. Often, one cut leads to another. The current high yield of 7.5% suggests the market has doubts over the sustainability of the payout.
All things considered, I think there are better dividend stocks to buy than BP right now.
Pharma giant
Another dividend stock that Hargreaves Lansdown investors bought last week was pharmaceutical giant GlaxoSmithKline (LSE: GSK). It has maintained its dividend this year and currently offers a prospective yield of about 5.5%.
I do see investment appeal here. One reason is I expect the healthcare industry to grow substantially over the next decade. Powerful trends such as the world’s ageing population and rising wealth in the emerging markets should drive the industry forward. This growth should boost GSK’s profits and support its ability to pay its dividend.
That said, GSK isn’t perfect as a dividend stock. One concern I have is the lack of recent dividend growth. For the past six years, GSK has paid the same full-year dividend of 80p. That’s not what you want to see as a dividend investor. Debt is also quite high, which adds risk to the investment case.
Overall, however, I like GSK. I see the stock as a ‘buy’ right now.
Financial services champion
Finally, Hargreaves Lansdown investors also bought Legal & General (LSE: LGEN) shares. It’s another high-yield play. Currently, the prospective yield on offer here is about 9%.
This is another dividend stock I’d buy. Normally, I’d see a 9% yield as quite risky. However, in LGEN’s case, I think it might be sustainable. One reason is the group didn’t rush to cancel, suspend, or cut its dividend earlier this year like so many other FTSE 100 companies did. In its half-year results, it declared the same payout as last year. Additionally, the group advised that, over the longer term, it expects to maintain its progressive dividend policy.
It’s also worth pointing out its chairman bought some shares in the company recently. This suggests he believes the stock is undervalued right now.
LGEN shares have been beaten up this year and currently trade on a forward-looking P/E ratio of just seven. I think this dividend stock offers value.
