Every month, we ask our freelance writers to share their top ideas for dividend stocks to buy with you — here’s what they said for March!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
BP
What it does: BP is an end-to-end oil and gas company, conducting business from exploration through to the selling of refined products.
By Jon Smith. The release of the full-year results for BP (LSE:BP.) in February caused the share price to spike. Even though certain profit measures fell versus 2022, it was a solid report.
This meant that the quarterly dividend per share was kept the same, with a current dividend yield of 4.79%.
Looking forward, I believe BP is in a good place for the coming year. It was able to reduce net debt to the lowest level in a decade, which should ease pressure for 2024. With strong operating cash flow of $32bn, I also don’t see a problem with paying out dividends in the near future.
As a caution note for income investors, the business is committed to repurchasing $14bn worth of shares by the end of 2025. This is money that could otherwise be paid as dividends, which could make some uncertain about buying the stock now.
Jon Smith does not own shares in any comapnies mentioned.
Greencoat UK Wind
What it does: the company invests in solar, wind farms, bioenergy and renewable heat infrastructure in the UK.
By Tom Rodgers. Since I bought shares in Greencoat UK Wind (LSE:UKW) in 2021, the performance of this renewable energy fund has been pretty stellar. Profits are up from £104m to £954m.
Manager Stephen Lilley has improved the fund’s earnings per share by more than 100% each year since 2020.
And a healthy £354m of cash on its balance sheet means Greencoat is well placed to pick up more assets to add to its 46 wind farms and 1,652MW of energy generation.
And I can’t see any sensible reason why the fund is trading at a whopping 22% discount to the net value of its assets (NAV). One thing to note is that funds don’t always close that gap, and the share price could remain less than NAV.
And renewable energy now generates a record 48% of UK electricity.
So with the dividend yield now at 7.5%, I’m highly tempted to buy more of this stock.
Tom Rodgers owns shares in Greencoat UK Wind.
HSBC Holdings
What it does: HSBC is one of the world’s largest banking and financial services organisations.
By Ben McPoland. I bought shares of HSBC (LSE: HSBA) in February because they looked cheap and carried an attractive dividend. Then a few days later, on 21 February, they suffered their biggest one-day drop in nearly four years!
The reason was that pre-tax profits plunged 80% to $1bn in the final three months of 2023. This was due to a significant writedown associated with the ongoing property crisis in China. Despite HSBC saying this troubled market has bottomed, things may yet get worse.
Still, 2023 taken as a whole was much better. Annual pre-tax profits rose 78% rise as the bank benefited from higher interest rates. And the full-year dividend of $0.61 is expected to stay steady this year. At the current share price, that translates into a very attractive ordinary dividend yield of 8%.
Looking ahead, HSBC’s long-term growth trajectory in Asia remains intact. The region is home to some of the world’s fastest-growing economies, each one being driven by rising incomes and a growing middle class. Demand for banking services should grow, underpinning HSBC’s dividend.
I intend to buy more shares.
Ben McPoland owns shares of HSBC Holdings.
Legal & General
What it does: Legal & General is a UK-based financial services provider that specialises in pensions and retirement services.
By Christopher Ruane. Pensions can make for a great business.
Demand is high and could well grow over time as the population ages. The sums involved can be substantial. That means that even modest-seeming fees can add up over time. Many customers’ timeframe is in decades.
That market attracts a lot of companies, unsurprisingly. That competitive landscape is a risk to profits of providers like Legal & General (LSE: LGEN).
But I think the business has a lot of competitive strengths, including an instantly recognisable brand, deep financial markets experience and large customer base.
That can translate into meaty profits.
In its most recently reported annual results, the firm earned £2.3bn in profits after tax. On revenue of £13.7bn, that performance demonstrates the attractive profit margins Legal & General can generate.
The stock currently offers a dividend yield of 8.1%.
Dividends are never guaranteed, but the business plans to increase its shareholder payout again this year.
Christopher Ruane does not own shares in Legal & General.
