Each month, we ask our freelance writers to share their high concepts for dividend shares with you — right here’s what they stated for September!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
BP
What it does: BP operates throughout the power worth chain, together with manufacturing, refining, buying and selling and retail.
By Andrew Mackie. The BP (LSE: BP.) share worth could have been heading decrease over the previous few months, however I see nothing to vary my bullish long-term view on the corporate.
In Q2, it hiked its dividend per share (DPS) 10% to eight cents. Certainly, over the previous three years, DPS has risen 52%. Regardless of these bumper returns, it nonetheless trades at a lowly ahead price-to-earnings ratio of eight, one of many lowest within the sector.
Again in 2020, when oil costs turned damaging, nobody was fascinated by investing in oil. I imagine it’s the identical in the present day. One of many fundamental causes is a scarcity of demand from China, the manufacturing plant of the worldwide financial system. However regardless of this, oil costs proceed to stay buoyant. One purpose is that demand is coming from a development increase within the US, pushed by onshoring of producing functionality.
A requirement shock attributable to a recession stays a transparent short-term threat to the BP share worth. However, historical past exhibits that commodities companies do properly in inflationary environments. And regardless of the rhetoric from Central Banks, such because the Federal Reserve, the battle in opposition to inflation is, for my part, removed from gained.
Andrew Mackie owns shares in BP.
Howden Joinery
What it does: The UK’s main producer of fitted kitchens, bedrooms, and joinery merchandise within the residence renovation market.
By Zaven Boyrazian. Renovation hasn’t been on the high of most family precedence lists of late. In spite of everything, with larger rates of interest and inflation placing stress on household budgets, it’s an expense that many have delayed.
But regardless of these headwinds, Howden Joinery (LSE:HWDN) has sucessfully retained its high and backside line enlargement from the lockdown market increase. Its newest outcomes present income nonetheless 48% forward of pre-pandemic ranges on the again of latest product launches, exercising pricing energy, and optimising operations.
Progress has slowed. With many households ready for decrease rates of interest earlier than kickstarting their renovation tasks, progress is likely to be making a comeback in 2025. And margins stay a few of the highest within the business
Clearly, this all is dependent upon how the financial system behaves. The longer it takes for the Financial institution of England to considerably convey down charges, the longer Howden must function in an unfavourable atmosphere. And the agency could slowly run out of steam.
However, with ample money on the books and a stable monitor report, it’s a threat value taking, for my part.
Zaven Boyrazian owns shares in Howden Joinery.
NatWest Group
What it does: NatWest Group is a group of banks, together with NatWest, Coutts and RBS.
By Jon Smith. It’s not simply the 55% acquire within the share worth over the previous 12 months that makes me wish to purchase NatWest Group (LSE:NWG) shares. The dividend yield is 5.06%, properly above the FTSE 100 common.
Heading into the autumn, I feel the inventory may preserve doing properly. It is because I count on two extra rate of interest cuts from the Financial institution of England this 12 months. Some would say it is a threat for the financial institution, as it would squeeze the online curiosity margin.
Though that is true, I count on the damaging impression to be outweighed by the rise in enterprise performed with new loans and mortgage merchandise. The group has a big retail, personal wealth and company division. With decrease rates of interest, demand for cheaper private and enterprise loans ought to enhance considerably. This could present the group with larger income, supporting future dividend funds.
Jon Smith doesn’t personal shares in NatWest Group.
Pets at Dwelling
What it does: Pets at Dwelling sells pet merchandise on-line and thru a UK chain of pet superstores, lots of which additionally supply vet and pet care companies.
By Roland Head. A 2023 survey by UK Pet Meals discovered that 57% of UK households had a pet, up from 40% in 2019.
All these additional pets want feeding and caring for. I imagine Pets at Dwelling (LSE: PETS) affords a robust alternative for UK inventory market traders to revenue from this progress in demand.
Annual gross sales have risen by 50% to £1.5bn since 2019, whereas working revenue has greater than doubled to £119m, for the 12 months ended 31 March 2024.
I feel the corporate’s built-in supply will assist it to win additional market share.
One threat is that an ongoing competitors investigation into vet teams may harm Pets’ pricing energy. Nevertheless, I reckon that is largely priced in.
Pets at Dwelling’s share worth has fallen 40% from its 2021 peak of 500p.
The shares now commerce on 13 instances forecast earnings, with a 4.6% dividend yield. I see this as an honest shopping for alternative.
Roland Head has no place in Pets at Dwelling.
Main Well being Properties
What it does: Main Well being Properties leases GP surgical procedures within the UK and Eire, primarily to authorities organisations.
By Stephen Wright. Rates of interest have began to return down within the UK. And I feel actual property funding belief (REIT) Main Well being Properties (LSE:PHP) stands to profit in fairly a giant manner.
With the overwhelming majority of its lease coming from nationwide governments, the chance of defaults is minimal. And demand for its buildings ought to be sturdy as life expectations enhance over time.
These options give Main Well being Properties good earnings visibility into the long run. And the corporate has used this to take a big quantity of debt onto its steadiness sheet.
That’s the most important threat with the enterprise in the intervening time. If the agency has to refinance its debt at larger charges, the dividend may come underneath stress.
Decrease rates of interest lower the possibility of this occurring, although. And with the share worth already beginning to rally from its lows, I’m seeking to purchase the inventory whereas there’s nonetheless a 6% dividend on supply.
Stephen Wright owns shares in Main Well being Properties.
