Anyone investing for income knows it has not been a great year. Many stocks have been cutting or postponing their payouts. However there are still good earners even in the FTSE 100. Here are my personal top three choices for dividend shares right now.
I have long been bullish on BAE Systems (LSE: BA), for growth as well as income. Though it perhaps doesn’t grab as many headlines as other FTSE 100 companies, I think it’s a solid performer. With a yield of about 4.6%, it’s my first choice for dividend shares right now.
Unlike many companies, I think its prospects of payouts are still looking fairly secure. Just last week it received confirmation from the German government that the country would be buying 38 Typhoon Eurofighters. The Typhoon makes up the backbone of BAE’s air portfolio, and is one of the UK’s most important exports.
For this reason, BAE usually gets government support – both political and financial. With a globally recognised brand, and growing interest in its next generation Tempest programme, I like BAE’s prospects going forward.
BP (LSE: BP) is another FTSE 100 dividend share that has been a major component in my portfolio for a while. With low oil prices and Covid lockdown, it has reduced its dividend this year, however.
The yield of around 9.4% is made up of the company’s dividends for this year over its current share price. Its future payouts in 2021 may still have some risks. Though oil prices have bounced back from their lows, they will still likely see some pressure going forward.
That said, I believe locking in a decent yield while the BP share price is low is still worth considering.
Furthermore, though I wouldn’t want to say its dividends will see no further cuts, I suspect if it does, it will reinstate them as soon as it can. I believe companies that have a solid history of dividend payments are ones to rely on to reinstate them when times are better.
With Covid dominating news headlines and FTSE 100 movements alike, it’s only natural that a big pharmaceutical company should make my top three dividend shares list.
Firstly, it’s worth noting that though coronavirus vaccines are dominating news flow right now, this isn’t my only consideration for GlaxoSmithKline (LSE: GSK).
We don’t yet have a full picture of which firms will produce which vaccines and when. I also think it perfectly possible that initially, there will be little profit to be made on the back of any vaccines. Both politically and from a public standpoint, Covid has been causing too many problems for big Pharma to be seen ot be cashing in.
I think this is only a short-term issue though.
It’s likely that Covid vaccines will need to be manufactured and created long after lockdowns stop grabbing headlines. It will also likely bring renewed interest in stopping other pandemics.
I think almost all major pharmaceutical companies are worth considering as growth investments right now. As FTSE 100 pharmas are concerned though, 5.7%-yielding GlaxoSmithKline is an obvious choice for dividend shares, I feel.
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Karl has shares in BAE Systems and BP. The Motley Fool UK has recommended GlaxoSmithKline. 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.