Best British dividend stocks to buy in May

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 May!

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Barclays

What it does: Barclays is one of the big four clearing banks, with an investment banking arm as well as its retail business.

By Alan Oscroft. Dividends look set to grow in 2023, with the financial sector at the fore.

AJ Bell‘s Dividend Dashboard suggests financials could account for half of the FTSE 100’s profit growth in 2023. And HSBC looks set to deliver the biggest chunk of dividend cash of the index.

So why Barclays (LSE:BARC)? The latest update puts the predicted yield at 6.8% for this year. And that’s with cover of around 3.8 times by earnings.

It’s not the biggest yield. But Barclays is also on a super low valuation. We’re looking at a price-to-earnings (P/E) ratio of less than five.

We face risks from worse inflation than expected, and maybe even even higher interest rates. An economic downturn is not good for Barclays.

But I think 2023 could be the start of a good spell for the banks. And I rate Barclays as possibly the best cash cow of the lot.

Alan Oscroft does not own Barclays, HSBC Holdings, or AJ Bell shares.

Persimmon

What it does: Persimmon is one of the UK’s largest housebuilders, building over 13,500 new homes each year.

By Matt Cook. I’ve been following Persimmon (LSE:PSN) for quite some time. As the highest-paying UK dividend stock last year, I had considered adding it to my portfolio on several occasions.

However, I was hesitant to do so due to the looming risk of the dividend being slashed. That happened in March, and the share price subsequently fell from around 1,452p to 1,234p the day after the dividend announcement.

That’s around the time I decided to buy shares of Persimmon and why I think it’s still a good buy for my portfolio in May. At the current price, the latest dividend is 4.7%, which is significantly below what the company paid last year.

Still, I didn’t start buying Persimmon shares this year for the current dividend yield. I think the stock is a good buy at a discounted price right now for potentially higher yields in the future.

Matt Cook owns shares in Persimmon.

Pets at Home Group 

What it does: Pets at Home is a leading retailer of pet food and animal accessories and also operates veterinary surgeries. 

By Royston Wild. I think retailer Pets at Home (LSE:PETS) could be a top dividend stock for investors to buy for May. It offers up a 3.4% forward dividend yield, one that beats the 3.2% average for FTSE 250 shares. 

Okay, this isn’t a huge margin. But I’d still buy the income-paying stock on expectation of forecast-beating results that could lift its share price higher. The company is due to release full-year trading numbers on 25 May. 

The broader retail sector is struggling as the cost-of-living crisis endures. But Pets at Home continues to trade strongly. In fact, like-for-like revenues rose 8.3% between October to December, speeding up from the prior quarter. This prompted the firm to raise its profits forecasts for the full financial year. 

The amount of money Brits spend on their pets has shown to be resolute even during tough economic periods. And Pets at Home — thanks in large part to the success of its VIP loyalty scheme — is thriving.

Royston Wild does not own shares in Pets at Home. 

Redde Northgate

What it does: Redde Northgate provides mobility solutions to customers including vehicle rental, repair and disposal services.

By Paul Summers: Investors looking for undervalued dividend-paying stocks could do a lot worse than Redde Northgate (LSE: REDD), in my opinion. 

Only this week, the company reported that it had been trading ahead of expectations with “strong and resilient demand” for its services. Indeed, things have been so good that it now thinks adjusted pre-tax profit for the whole year will come in ahead of market consensus.

Despite this, shares still trade at just seven times forecast earnings for the next financial year (beginning in May). 

Importantly, they are also predicted to yield a monster 6.6% in FY24. That’s more than double the yield currently offered by the FTSE 250 as a whole.

Ongoing supply chain issues and inflation could still cause a few headaches when it comes to repairing vehicles. However, the diverse business model and customer base should mean the payout is safe for another year. 

Paul Summers does not own shares in Redde Northgate