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My top 3 dividend shares for 2021 and beyond

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When it comes to selecting top dividend shares for a long-term holding period, I like to search for companies in defensive sectors. I want to compound gains from dividend shares year after year. So, the stability of the dividend record is important. And I just can’t find that quality in cyclical sectors, for example.

My top dividend shares right now  

I’m keen to add FTSE 100 dividend share United Utilities (LSE: UU) to my long-term portfolio. With the share price near 940p, the water and wastewater company has a forward-looking dividend yield of almost 4.7% for the trading year to March 2022. And earnings look set to cover the forward payment just over once.

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The company has an unbroken dividend record stretching back at least as far as 2015. And there’s been a modest incremental annual increase in the dividend payment every year, including through the pandemic.

In November’s half-year results report, the company delivered a positive outlook statement and confirmed its dividend policy “of targeting a growth rate of CPIH inflation each year through to 2025.” I think that commitment could help to make United Utilities a steady performer in my portfolio over the coming years.

Outside the Footsie, I like FTSE 250 food ingredients provider Tate & Lyle (LSE: TATE). With its share price close to 655p, the forward-looking dividend yield for the trading year to March 2022 is around 4.7%. And forward earnings should cover the dividend payment about 1.8 times.

The company is another with an unbroken record of dividend payments through the Covid-19 crisis and stretching back at least five years. And there’s also a pattern of incremental dividend increases over recent years that City analysts forecast to continue.

November’s half-year results report delivered some robust figures from what has been a challenging period for many businesses. And I’d describe the overall tone regarding the outlook as quietly confident. I think Tate & Lyle would make a strong long-term hold in my dividend-focused portfolio.

An out-of-favour stock with a big yield

Back in the FTSE 100, I’d buy shares in smoking products company British American Tobacco (LSE: BATS). With the share price around 2,840p, the forward-looking dividend yield is almost 7.8% for 2021. And forward earnings should cover the dividend payment around 1.5 times.

The company has a strong record of paying shareholder dividends and City analysts expect more incremental rises ahead. Meanwhile, in an early December trading update, chief executive Jack Bowles said he is “confident” about the future for the company. And the directors have the ambition to generate £5bn form new category revenue by 2025.

Bowles said the company’s strategy is “transforming” the business to reduce the health effects of the firm’s products by providing “a range of enjoyable and less risky products.” Although the stock seems to be out of favour with investors, I’d harvest and reinvest the dividends.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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