The 10 best-yielding dividend stocks in the UK
Stocks that pay dividends can provide a great opportunity to increase the income diversification of an investment portfolio. If you are looking for dividend-yielding stocks to add to your trading or investment portfolio, this article covers the best-yielding dividend stocks available in 2022 from some of the biggest UK companies.
Read on to find out which stocks offer some of the highest dividend rates in the FTSE 100 as of 16 April 2021 (excluding special dividends). These figures are correct at the time of writing and may change in the future. Read more about trading the FTSE 100.
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1. Imperial Brands
Imperial Brands is the fourth-largest tobacco company in the world when measured by market share. Founded in 1901, Imperial Brands owns popular brands such as Golden Virginia, RizLa and JPS.
Key Fundamentals
Avg. Volume: 256,863
Market Cap: £15.45bn
PE Ratio: 10.25
Dividend Yield: 8.86%
| Year | Value |
|---|---|
| 2019 | 206.57p |
| 2018 | 187.79p |
| 2017 | 170.72p |
| 2016 | 155.20p |
| 2015 | 141.00p |
Imperial Brands currently offers an attractive dividend of 8.86%. IMB has managed to increase its dividend year on year since 2012, so there are good prospects for future dividend growth if it manages to maintain these increases.
2. M&G
M&G is an investment management company that is headquartered in London. It deals primarily with equities, portfolio management, fixed income and real estate, both in the UK and overseas. M&G has provided services to customers for over 80 years and is one of the largest fund management companies in the country.
Key Fundamentals
Avg. Volume: 1,412,115
Market Cap: £5.02bn
PE Ratio: 4.55
Dividend Yield: 8.32%
| Year | Value |
|---|---|
| 2019 | 0 |
| 2018 | 0 |
| 2017 | 0 |
| 2016 | 0 |
| 2015 | 0 |
M&G is fairly new to the FTSE 100, only registering on the London Stock Exchange in 2019 after a de-merger from its parent company, Prudential. The company started paying dividends in 2020 and quickly rose to the top of the high-yielding list.
3. Evraz
Evraz is a vertically integrated steel manufacturing and mining company. The company has headquarters in London and the majority owner is Roman Abramovich, a billionaire who is famous for owning the premier league football club Chelsea F.C.
Key Fundamentals
Avg. Volume: 490,162
Market Cap: £7.56bn
PE Ratio: 19.7
Dividend Yield: 8.27%
| Year | Value |
|---|---|
| 2019 | 53p |
| 2018 | 55p |
| 2017 | 42p |
| 2016 | 0 |
| 2015 | 0 |
Evraz stock has an annual yield of 8.27% and pays dividends twice a year. However, Evraz does not have a long history of dividend payments and has only offered dividends since 2017. Additionally, the company has total liabilities of around 7.7 billion, although this has been decreasing consistently year on year.
4. British American Tobacco
British American Tobacco is a multinational company that manufactures and sells tobacco products in more countries around the world than any of its competitors. Founded in 1902, it is now the largest cigarette maker in the world based on net sales. Due to its international presence, it is listed on four stock exchanges.
Key Fundamentals
Avg. Volume: 411,525
Market Cap: £63.03bn
PE Ratio: 11.02
Dividend Yield: 7.64%
| Year | Value |
|---|---|
| 2019 | 50.75p |
| 2018 | 48.80p |
| 2017 | 0 |
| 2016 | 0 |
| 2015 | 0 |
British American Tobacco only started paying out dividends in 2018 but has risen substantially to a healthy and competitive figure of 7.64%. With its development of electronic cigarettes, as buyers move away from the traditional kind, British American Tobacco is certainly a company to watch.
5. Persimmon
Persimmon is a British house-building company with headquarters in York. Persimmon is made up of 31 regional operating businesses and builds homes in over 380 locations worldwide. It is one of the UK's most successful house builders.
Key Fundamentals
Avg. Volume: 42,197
Market Cap: £10.24bn
PE Ratio: 10.23
Dividend Yield: 7.32%
| Year | Value |
|---|---|
| 2019 | 235.00p |
| 2018 | 235.00p |
| 2017 | 235.00p |
| 2016 | 135.00p |
| 2015 | 110.00p |
Persimmon offers an attractive dividend yield of around 7.32% and offers a relatively cheap stock price. Therefore, with combined quality, traders may see Persimmon as a bit of an undervalued stock.
6. Legal & General
Legal & General is a financial services company that deals with pensions, lifetime mortgages, annuities and investments for more than 10 million clients worldwide. It has headquarters in the City of London.
Key Fundamentals
Avg. Volume: 1,663,180
Market Cap: £15.95bn
PE Ratio: 8.77
Dividend Yield: 6.36%
| Year | Value |
|---|---|
| 2019 | 17.57p |
| 2018 | 16.42p |
| 2017 | 15.35p |
| 2016 | 14.35p |
| 2015 | 13.40p |
Legal & General have been paying consistent dividends for years to investors, and it shows promising growth and revenue for the future. Although most of its operations are in the UK, the company also works on an international level.
7. Phoenix Group Holdings
Phoenix Group Holdings is one of the largest insurance providers in the UK. The company specialises in the acquisition and management of life insurance and pension funds. Founded in 1857 as The Pearl Loan Company, it has acquired multiple companies since then, including Standard Life Assurance and ReAssure Group.
Key Fundamentals
Avg. Volume: 372,997
Market Cap: £6.89bn
PE Ratio: 9.35
Dividend Yield: 6.36%
| Year | Value |
|---|---|
| 2019 | 46.80p |
| 2018 | 46.00p |
| 2017 | 45.14p |
| 2016 | 41.75p |
| 2015 | 40.52p |
The dividend for Phoenix Group Holdings has been increasing steadily since its first payout in 2010. Despite its share price plummeting in the first quarter of 2020, it has managed to climb back 20% over recent months and it shows resilience to any further drops.
8. BP
Formerly The British Petroleum Company, BP is a multinational oil and gas company that offers a relatively high dividend yield, which can appeal to income investors. Founded in 1909, BP is the sixth-largest energy company in the world by market capitalisation and it is a very popular stock on our platform for energy trading.
Key Fundamentals
Avg. Volume: 8,723,537
Market Cap: £61.61bn
PE Ratio: 14.93
Dividend Yield: 6.27%
| Year | Value |
|---|---|
| 2019 | 30.07p |
| 2018 | 29.70p |
| 2017 | 29.15p |
| 2016 | 29.15p |
| 2015 | 26.77p |
As one of the largest-companies in the FTSE index, BP is offering a competitive dividend rate of 6.27% in comparison to other similarly positioned companies. However, it is worth noting that BP's former CEO, Bob Dudley, retired and was replaced by Bernard Looney in February 2020. Looney has ambitions to expand the company’s climate targets, which will result in some of the biggest changes the company has experienced in its 113-year history.
9. Polymetal International
Polymetal is an Anglo-Russian precious metals mining company that is headquartered in Cyprus. It is a leader within the precious metals industry, producing both gold and silver on a global level. The company has a total of nine mines worldwide and is continuing to expand their portfolio of acquisitions.
Key Fundamentals
Avg. Volume: 284,022
Market Cap: £7.20bn
PE Ratio: 9.96
Dividend Yield: 6.13%
| Year | Value |
|---|---|
| 2019 | 62.00¢ |
| 2018 | 48.00¢ |
| 2017 | 44.00¢ |
| 2016 | 27.00¢ |
| 2015 | 21.00¢ |
Polymetal International is a new contender on this list as it now pays its investors a healthy dividend of 6.13% in 2021. Therefore, it deserves its spot on the top dividend-stocks list and it appears to be rising consistently.
10. GlaxoSmithKline
GlaxoSmithKline (GSK) is one of the top pharmaceutical companies within the UK healthcare sector. It operates in multiple countries around the world and holds the title of the tenth-largest pharmaceutical company worldwide, being listed on both the LSE and NYSE.
Key Fundamentals
Avg. Volume: 2,560,745
Market Cap: £69.40bn
PE Ratio: 14.63
Dividend Yield: 5.93%
| Year | Value |
|---|---|
| 2019 | 80.00p |
| 2018 | 80.00p |
| 2017 | 80.00p |
| 2016 | 80.00p |
| 2015 | 80.00p |
GSK is the fourth-largest company in the FTSE 100 when measured by market capitalisation and does not seem to be contested for its position. With a healthy dividend rate of around 5.93% and the fact that it is a healthcare stock, GSK offers a level of stability to investors.
Read our similar article on high-dividend ETFs to continue trading within the equity market >
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How to pick high-yielding dividend stocks
Investing in stocks that pay large dividends and deliver consistent growth is a popular investment strategy. Investing in these dividend or income stocks is more complicated than simply choosing a stock that has a high yielding dividend rate. Income stocks are vulnerable to dividend cuts, missed payments, dividend elimination and share price crashes.
Profitability
An income stock should be profitable. Unlike growth stocks, which are more of a speculative investment, income stocks should show year-on-year consistent profitability. The consistency of increasing profit helps to ensure that there will not be any dividend cuts or payout problems in the future. This follows the general logic that a financially stable company will be more likely to payout a regular dividend.
Payout ratios
A payout ratio represents the relationship between a company’s income and its dividends. As companies usually pay dividends out of their profits, a company with dwindling profits could make cuts to their dividend. Therefore, a company’s dividend payout ratio should correlate with its net income. By comparing these two metrics, you can start to establish if the current dividend rate is sustainable. Companies with a high payout ratio may be committed to paying out such a dividend, with fears that investors would look elsewhere if they cut the rate. Moreover, some companies or industries generally pay a higher dividend, as growth opportunities are not as evident.
Dividend cover
Dividend cover is a helpful ratio in determining how sustainable a company’s dividend is in the long-term, similar, but inverse to payout ratio. A company’s dividend cover indicates its capacity to pay dividends out of profit earned. It is displayed as a ratio, which shows how many times the dividend is covered by profits available. See below for the formula.
Dividend Cover = EPS (Earnings per share) / DPS (Dividends per share)
A ratio above 1.0 is considered healthy and anything less than 1.0 is possibly not sustainable and suggests that the dividend is at risk of being cut. Many companies aim for a dividend cover of around 2.0 to ensure they efficiently use their capital in a sustainable manner.
Dividend volatility
When looking at a company’s previous financial and dividend information you can make an informed decision based on the stock’s dividend volatility. If a stock has a history of paying high dividends on time and consistently increasing the dividend yield, it can be classified as a stable income stock. Although slow and steady growth may not be exciting, combining the reinvestment of dividends, increasing dividend yields and compound interest can provide great returns.
This, therefore, stresses the importance of choosing stocks that are unlikely to cut their dividend rate whilst maintaining consistent growth. When a company struggles financially and cuts its dividend, you could lose your dividend income, which is based on the current value of your initial investment. A struggling company with a declining share price has double the impact, as your dividend payout will suffer from the loss of your initial investment.
Dividend growth
Companies can increase the dividend of a stock even if the company is struggling financially. Based on the volatility of the dividend, it can be worth analysing whether or not the EPS (earnings per share) of the business is growing. If the company has a relatively healthy dividend but its EPS is falling, the dividend will likely experience some stress.
Best platform to buy dividend stocks
When using leveraged trading methods traders can play both sides of the market by ‘buying’ the asset and going long, or ‘selling’ the asset by going short. When ‘buying’ and going long, traders are entitled to the assets dividend payment and will receive it in their account as normal. However, for traders who wish to ‘sell’ or short their stock, they are charged the dividend’s value accordingly.
We offer a large number of best-yielding dividend stocks to buy or trade through our online trading platform, Next Generation. Sign up below to familiarise yourself with the platform using a demo trading account, in order to take advantage of the many price tools, drawing tools and technical indicators available for the stock market. See our competitive costs on our trading fees page.
Dividend stocks app
Our platform is also available on mobile and tablet devices as part of our advanced dividend stocks app. Traders have the same full access to chart forums and social trading news so that you can keep up to date on-the-go. Find out more about mobile applications here.
Summary
Investing and trading stocks that have high dividend rates can contribute to a balanced and diversified investment portfolio. The more diverse the array of assets you hold, the more you spread the risk and potential loss of your investments.
When investing in stocks with a high dividend rate it may be very useful to view the history of the stock’s dividend and analyse other company fundamentals such as a company's valuation. All of these factors could influence the business’ ability to pay dividends. Beyond analysing the dividend history and company fundamentals, it can also be useful to analyse how other companies in that competitive space are performing.
In the end, you cannot guarantee a company is going to pay a dividend, or earn enough to match or exceed their last dividend payments. However, you can make a decision based on a number of valuable metrics such as the variables covered, to make the most informed decision possible.
FAQ
How is a stock dividend calculated?
Stock dividends yields are calculated by dividing the annual dividends per share by the price per share. This data is usually taken from the previous year’s financial report. Learn more about how to trade shares with a high dividend yield.
What are the advantages of dividend stocks?
Investing in dividend stocks offers relative stability and could help create a more balanced investment portfolio, as well as low effort-to-reward income. Companies consistently paying dividends are usually large-cap or blue-chip, with some exceptions. Read more about trading blue-chip stocks. However, companies can slash their dividend at any point if they are facing economic hardship or uncertainty, so this should be considered when opening a position on a dividend stock.
How are stock dividends paid?
Stock dividends are commonly paid twice a year to shareholders who have purchased shares in a company, at a pre-determined date following a company releasing its half- and full-year results. The dividend value is based on how many shares the shareholder owns. When trading on shares with us, you may be entitled to dividend adjustments. Learn more about these types of corporate actions.
Do tech stocks pay dividends?
Most of the larger and established tech giants choose not to pay dividends to their shareholders, and some dedicate a very modest percentage. If you’re looking to earn a more generous dividend payout, it may be worth considering pharmaceutical stocks instead.
Why invest in stocks that don’t pay dividends?
In some cases, stocks that don’t offer dividends to shareholders can have a higher potential for growth. Instead of offering payouts, these companies prefer to reinvest their earnings into new projects, and this may lead to a rise in share price and overall company value. Read about the company fundamentals to take into consideration when valuing the health of a stock.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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