UK shares to buy now: two 10% dividend raisers I’d consider

Christopher Ruane discusses two UK shares to buy now for his portfolio which both increased their most recent annual dividend by double digits.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In the hunt for yield, if it looks too good to be true often it is. However, among my list of UK shares to buy now for my portfolio, there are two shares that raised their dividends by 10% this year. Not only that, I see potential for further double-digit dividend raises from these companies in the future.

Let’s get into the details.

Little-known dividend raiser

The first of the dividend raisers on my UK shares to buy now list is Judges Scientific (LSE: JDG). Like Warren Buffett’s Berkshire Hathaway, Judges is essentially a holding company. It buys up scientific instrument manufacturers, which continue to trade under their own names. That helps them build their reputation. In terms of business approach, Judges – like Berkshire – is also fairly hands off. But by acting as a centralised capital allocator and administrator, it can help the individual companies improve their business processes, without getting in the way.

Like Buffett, Judges is also disciplined in how much it pays for acquisitions. That enables it to grow its business in a way that adds rather than detracts value. That’s not where the comparison with Buffett ends. He often talks about pricing power: the ability to combat inflationary pressures through raising prices. This is easier if a business has a ‘moat’: something that helps it defend itself from competitive attack. Judges has purposefully targeted a business area where quality and precision matter. That can help insulate it against low cost competition.

From profits to dividends

While I like Judges’ similarities to Buffett’s style, I also appreciate one way in which it diverges from the Sage of Omaha: dividends.

Berkshire doesn’t pay dividends. Judges, by contrast, pays them and has consistently raised them. The increase in its most recent full-year dividend was 10%. That’s actually low compared to the company’s recent history. In the prior two years, ordinary dividends had increased 25% annually. On top of that, there was a £2 special dividend for the 2019 financial year.

Dividends are never guaranteed, though, and Judges does have risks. Institutional shutdowns and travel restrictions threaten revenues as its engineers can’t get out to install new instruments. A yield of just 0.7% also raises the issue of whether the share price, now trading at a price-to-earnings ratio of 45, is overvalued. 

UK shares to buy now: DCC

Like Judges, DCC (LSE: DCC) raised its most recent full-year dividend by 10% despite the effects of the pandemic. But that was not a surprise for DCC shareholders: it has raised its dividend by double digits in four out of the past five years, after all. DCC has now clocked 27 years of annual dividend raises in a row. The current yield on DCC shares is 2.5%.

Track record of business performance

Like Judges, DCC is not well known by many investors. The Irish-based, London-listed company is basically a small conglomerate with businesses spanning fuel distribution, healthcare, and technology. Management has proven its ability to grow the business and reward shareholders. But it does face risks. As one of Europe’s largest natural gas distributors, pricing swings and environmental regulations could both eat into profits in coming years. That could hurt dividends.          

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Berkshire Hathaway (B shares). The Motley Fool UK has recommended Judges Scientific and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). 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.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »