Buying UK dividend stocks is my favourite way of adding easy returns into my portfolio. This is especially true throughout periods of stock market uncertainty. When the FTSE 100 drops, dividend payments help to protect against capital gains losses and when the index rises they are a hedge against inflation. Moreover, when you invest for the long term, the probability of your investments recovering from short-term volatility increases.
So, whatever 2021 has in store, I think the following five shares are some of the best dividend stocks on the FTSE 100 for future returns right now.
Well established, defensive stocks such as GSK are always a must for my portfolio whatever the state of the stock market. Paying a consistent quarterly dividend of 19p this year, despite the share price drop, Glaxo’s expected yield sits around a juicy 5.7%. The pharma giant also boasts a large portfolio of marketed products, giving it a competitive advantage with respect to its peers. Moreover, I think the firm is undervalued right now as investors focus on AstraZeneca and its potential Covid-19 vaccine.
2. BAE Systems
BAE Systems, with its strategic plans closely aligned with growth in global defence spending, is another stable dividend payer. The long-term nature of defence contracts mean the expected 4.6% dividend yield is likely highly sustainable throughout 2021 and beyond. It could be one of the safest dividend stocks on the Footsie. And with a dividend cover ratio of around 2.0, BAE currently has no problems in paying it.
Consumer goods giant Unilever is another long-term purchase. Indeed, its steady share price has grown around 60% over the last five years. With fingers in many pies, so-to-speak, Unilever produces goods that people use every day, from soaps and other cleaning products to tea. This means that demand for the firm’s offerings is real and consistent. Indeed, it’s product branding it second-to-none, leaving peers in its wake. Who doesn’t recognise brands such as Knorr and Dove?
4. Reckitt Benckiser
Reckitt is another FTSE 100 stalwart with well-known brands, such as Dettol, Calgon, and Nurofen. Currently trading around £65, Reckitt is pulling back from its post-summer slump. This is likely due to excellent results so far this year. Indeed, I think the market for hygiene products is likely to keep growing in the near future, leaving Reckitt well-placed to capitalise on it.
5. Royal Dutch Shell
Oil companies have had a hard time this year, and Shell is no exception. However, last week it was one of the FTSE 100’s best-performing stocks, likely due to a climbing oil price and the news of multiple potential Covid-19 vaccines. However, Shell also leading the fossil fuel market in the conversion to renewables, the oil major aiming for net-zero emissions by 2050, and despite a dividend cut this year, a commitment to increase it going forward.
2021 is not far away and we don’t know what the future has in store. But, there are things we can do to protect investments from any potential volatility. Adding UK dividend stocks to a well-balanced portfolio is one such method. I think the five shares listed here are a good beginning. If you disagree, there are others out there, you just need to look.
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Rachael FitzGerald-Finch owns shares of GlaxoSmithKline and Royal Dutch Shell B. The Motley Fool UK has recommended GlaxoSmithKline and Unilever. 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.