3 UK dividend stocks I’d buy in October

The UK stock market is home to many great dividend-paying companies. Here are three UK dividend stocks Edward Sheldon likes right now.

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The UK stock market is home to many great dividend-paying companies. Whether you’re looking for high yield, or dividend growth, there are plenty of opportunities.

Here’s a look at three UK dividend stocks I’d buy in October.

Strong high-yield play

One UK dividend stock that stands out to me as a bargain right now is Legal & General (LSE: LGEN). Its share price has taken a big hit this year and it currently trades on a forward-looking P/E ratio of just 6.8. The prospective dividend yield on offer is a high 9.3%

Should you invest £1,000 in Legal & General 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 Legal & General made the list?

See the 6 stocks

For a long time, I’ve seen Legal & General as one of the FTSE 100’s best high-yield plays. Unlike many other high-yield stocks, LGEN actually has plenty of growth potential. Recent news from the company has reinforced my view. While a large number of other FTSE 100 companies have suspended, cancelled, or cut their dividends this year, L&G has maintained its payout.

One thing that looks interesting here is on 25 September, the chairman purchased 41,974 shares. This is a good sign, in my view. It suggests the insider is confident about the future and sees the stock as currently undervalued.

All in all, I see a lot of appeal in Legal & General right now. I’d buy this dividend stock today.

Top UK dividend stock

If dividend safety is your focus, I’d take a look at consumer goods company Reckitt Benckiser (LSE: RB). It doesn’t offer the highest yield. Currently, the prospective dividend yield is just 2.3%. However, in my view, this is one of the safest dividend stocks in the entire FTSE 100.

There are a few reasons I see RB’s dividend as very safe. Firstly, the company – which focuses on health and hygiene – is pretty much recession proof. Consumers buy its products irrespective of economic conditions. Secondly, its hygiene sales are booming due to Covid-19. I expect this trend to persist for a while. Finally, the dividend coverage ratio – a key measure of dividend safety – looks robust at 1.8.

Reckitt shares are a little pricey. Currently, the forward-looking P/E ratio is about 24. Yet given the global focus on hygiene, I think the stock can climb higher. Barclays has a price target of 9,000p. That’s about 17% above the current share price.

Value opportunity

Finally, I also think FTSE 100 packaging company DS Smith (LSE: SMDS) is worth a look right now. It has been a solid dividend payer in the recent past. However, it suspended its payout earlier in the year due to Covid-19 uncertainty. Recently though, it announced it plans to reintroduce its dividend shortly.

The reason I see appeal in DS Smith is that I’m very bullish on the online shopping theme. In the UK, the percentage of overall retail sales represented by online sales has jumped from approximately 6.5% to around 20% over the last decade. Covid-19 is likely to accelerate the trend. Packaging companies are a great way to get exposure to the theme.

DS Smith has plenty of exposure to e-commerce. As a result, the business hasn’t been impacted badly by the coronavirus. However, its share price has still taken a large hit this year. I think buying the stock now, while it’s still beaten down from Covid-19 uncertainty, could be a smart move. The P/E ratio using next year’s earnings forecast is just 10.4.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Edward Sheldon owns shares in Legal & General, Reckitt Benckiser, and DS Smith. The Motley Fool UK has recommended DS Smith. 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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