3 top FTSE dividend shares to buy now

Here are three FTSE dividend shares backed by stable businesses in cash-generating sectors ideal for servicing reliable shareholder dividend payments.

| 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.

sdf

FTSE 100 energy company SSE (SSE) operates regulated electricity networks in the UK. And the company has been doing a good job moving operations over to renewable energy sources such as wind generators.

Meanwhile, shareholder payments look set to grow by increments in the years ahead after the directors rebased the dividend lower in the trading year to March 2020.

With the share price near 1,556p, the forward-looking yield is around 5.5% for the year to March 2023. I think that’s a generous and potentially sustainable yield from a business that fits well in today’s energy markets. I’d buy the shares with the aim of holding for at least a decade.

Should you invest £1,000 in National Grid right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if National Grid made the list?

See the 6 stocks

Of course, there are no guarantees of a positive investment return. And one area I’d keep an eye on is the firm’s level of borrowings, which are quite high. Indeed, the energy business takes lots of cash to develop and maintain infrastructure. If SSE’s cash flow falters, it’s possible shareholder returns could come under pressure. Nevertheless, I’d embrace the risks and include the stock in a long-term diversified dividend portfolio.

A defensive, cash-generating sector

In the FTSE 250 index, I reckon one of the best income investments can be found in food and beverage ingredients producer Tate & Lyle (LSE: TATE). I like the strong record of incremental rises in the dividend and the way a consistent stream of cash flowing into the business backs those payments.

It helps a lot that the firm operates in a stable and defensive sector, which I see as ideal for a dividend-led investment strategy.

With the share price near 763p, the forward-looking yield is near 4.3% for the trading year to March 2023. And in last week’s full-year results report, the company reported a “robust” performance. And the directors said the business is emerging stronger from the pandemic with decent long-term growth potential.

One concern I have is that City analysts forecast the pace of growth in earnings to be pedestrian. And it’s possible the valuation could contract, especially if earnings slip in the years ahead. Nevertheless, I’d take on the risks and buy some of the shares to hold for the long term.

A FTSE company in a unique position

I’d find a place in my income portfolio for FTSE 100 energy company National Grid (LSE: NG). The firm has a unique position at the heart of the UK’s energy transmission networks. And it also has an energy business in the USA. Both divisions generate steady incoming cash flow, which is good for servicing shareholder dividends.

With the share price at 952p, the forward-looking dividend yield is around 5.4% for the trading year to March 2023. And City analysts see modest increases in the dividend in the coming years. However, National Grid is a heavily regulated business and capital reinvestment requirements are high for sustaining and improving the energy networks.

The firm has a high debt load and the directors will always need to balance servicing debt interest and shareholder dividend returns. It’s possible that future changes in regulatory requirements could make that task more difficult and I could lose money on the shares.

However, I’d take the risk and aim to hold the stock for a long-term investment.


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.

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.

More on Investing Articles

Road 2025 to 2032 new year direction concept
Investing Articles

The Ocado share price is up 48% in a month! Is this the start of a stellar recovery?

Harvey Jones says the Ocado share price is the ultimate binary play. The FTSE 250 stock could fly, or it…

Read more »

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing Articles

Growth, buybacks and dividends galore – are NatWest shares the ultimate no-brainer buy?

NatWest shares are flying again, as we saw in its expectation-thrashing results. Harvey Jones looks at whether the FTSE 100…

Read more »

Female Tesco employee holding produce crate
Investing Articles

Is a UK stock market correction coming?

Our writer’s increasingly concerned about the apparent disconnect between the performance of the UK stock market and that of the…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

The Rolls-Royce share price has soared 66% already this year! Can it really keep going?

Even after a stunning few years, the Rolls-Royce share price has soared by two-thirds already this year. Our writer revisits…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Spare £5k? Here’s how long it would take to generate a second income of £5k every year!

Christopher Ruane explains the maths behind building a second income from dividend shares, as well as some of the opportunities…

Read more »

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

As the FTSE 100 hits an all-time high, is it too late to get in on the boom?

The FTSE 100 index of leading British shares hit a new all-time high in the past week. Our writer explains…

Read more »

Close-up of British bank notes
Investing Articles

3 shares to consider for long-term passive income

Christopher Ruane thinks investors on the hunt for passive income streams should consider this diverse trio of dividend-paying shares.

Read more »

DIVIDEND YIELD text written on a notebook with chart
Investing Articles

Here are the latest dividend yield forecasts for Legal & General, Aviva, and M&G shares

If someone’s looking for high dividend yields on the London Stock Exchange, these three Footsie financial stocks are definitely worth…

Read more »