5 Top Dividend Stocks to Watch in 2024
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The UK stock market has seen impressive growth in 2024. However, several high-yield dividend stocks may have gone under the radar, potentially offering attractive opportunities for investors.
You’ve probably heard of most of these names, but when compared to brands we see in the press every day, such as Nvidia, Apple, and Meta, these picks can often go unnoticed –they’re worth keeping in mind.
So what are dividends?
A dividend is a reward paid to shareholders for their investment in the company, and it usually originates from the company's net profits.
When a company chooses to pay a dividend, they are choosing to distribute some of the company’s earnings to its shareholders. The company will determine a certain amount of money to be distributed per share, so the amount that you ultimately get will depend on how many shares you have (or fractions of a share).
And what are yields you say? Here’s a quick break down:
Dividend yield is a key metric for evaluating dividend stocks. It shows the annual dividend payout as a percentage of the stock’s price.
If that sounds complicated, don’t worry. Just use this formula:
Dividend Yield = Annual Dividends Per Share ÷ Current Share Price
For example, if a company pays a £2 dividend per share annually, and the stock price is £50, the dividend yield would be 4%.
Or, put another way, let’s say you’re considering a company that pays a 3% dividend yield. If the stock price is £135, your dividend yield on a single share would be £4.05 (assuming, of course, that the share price is £135 at the time the company makes its dividend payout).
Understanding dividend yield helps assess how much passive income you can expect relative to your investment in a stock.
It's also worth noting…
High yields may signal financial distress. A very high dividend yield could indicate that the company's stock price has dropped significantly due to poor financial performance or market concerns, which could lead to dividend cuts or suspensions.
We tell you this because no matter what you’re investing in, it’s always smart to do your homework on a company first. Understand what they do, and understand that past performance isn’t an indicator of future success.
Now with all that in mind, let's dive into some of the most popular dividend stocks on the market (and at NuWealth).
1. Unilever
Industry: Consumer Goods (Food, Household, and Personal Care Products)
Annual Dividend Yield: 3.03% (1 October 2024)
Unilever is a global leader with a portfolio of well-established brands (Dove, Ben & Jerry’s, Hellmann’s) that ensure consistent revenue. In periods of economic uncertainty, consumer staples like Unilever’s products remain in demand, providing stability. Its consistent cash flow supports strong and reliable dividend payments, making it one of the most reliable choices for dividend-seeking investors.
2. Diageo
Industry: Alcoholic Beverages
Annual Dividend Yield: 2.98% (1 October 2024)
Diageo owns iconic brands including Johnnie Walker, Guinness, and Smirnoff, resulting in a leading position in the global spirits market. Alcoholic beverages are known for their resilience during market downturns (read into that what you will), and Diageo’s strong pricing power and diverse geographic presence help maintain solid profits. The company has a long track record of steadily increasing dividends, which adds to its appeal for investors looking for income stability.
3. Vodafone
Industry: Telecommunications
Annual Dividend Yield: 10.14% (1 October 2024)
Vodafone is one of the largest telecommunications companies in the world. While facing competitive pressures, its large scale, strong infrastructure, and strategic focus on 5G and Internet of Things (IoT) services position it for long-term growth. Despite some volatility, Vodafone has maintained high dividend yields, making it attractive for income-focused investors willing to take on some risk.
4. HSBC
Industry: Banking and Financial Services
Annual Dividend Yield: 7.20% (1 October 2024)
HSBC is one of the world’s largest banks, with significant exposure to Asia, which remains a high-growth region. The bank has weathered regulatory and economic challenges well, maintaining a healthy balance sheet. As global interest rates rise, HSBC is poised to benefit from higher lending margins. Its dividend policy is strong, with an attractive yield supported by solid earnings, making it a good choice for dividend investors in the financial sector.
5. GSK (GlaxoSmithKline)
Industry: Pharmaceuticals and Healthcare
Annual Dividend Yield: 4.00% (1 October 2024)
GSK is a major player in the global healthcare and pharmaceutical space, specialising in vaccines, pharmaceuticals, and consumer healthcare products. With a pipeline of innovative products and strong demand for vaccines and specialty medicines, GSK has a stable revenue base. Its recent focus on restructuring and spinning off its consumer health business has strengthened its financial position, allowing it to maintain generous dividend payouts.
Key Reasons These Stocks Stand Out for Dividend Investors in 2024:
While it’s not always easy to spot up and coming high-yield stocks, there are some attributes shared by these more established brands we’ve just mentioned which make them particularly strong.
Stability in Defensive Sectors: Companies in consumer goods (Unilever), alcoholic beverages (Diageo), and healthcare (GSK) tend to perform well even during economic downturns. Their products and services are necessities, which provides consistent cash flow and supports strong dividends.On the other side of the coin, these companies tend to perform well during times of economic stability and growth, too, as people spend more and still need access to healthcare.
Attractive Dividend Yields: Vodafone and HSBC offer particularly high yields, appealing to income-focused investors. These yields are supported by their large-scale operations, though some risks remain due to industry challenges such as hardware availability, and competition from other companies.
Global Diversification: These companies operate across various regions, reducing geographic risk and providing access to growing markets, particularly in emerging economies. In other words, they’re not tied to the fortunes of one country or continent. Like a well-balanced portfolio, they’re better equipped to ride out the ups and downs from one side of the world to the other.
Track Record of Dividend Payments: All five companies have a history of paying dividends and have policies in place that prioritise shareholder returns through regular dividends.
The Bottom Line
If you’re looking to invest in dividend stocks you should always ensure you’ve looked into the overall health of the company. It’s important to remember that companies may offer a high yield even when financially unstable.
As always, ensure that you do your own research and do your best to stick to a consistent strategy, such as investing regularly.
Another great aspect of dividend investing is reinvesting the dividend payouts to harness the power of compounding.
This is not financial advice, always do your own research. When investing your capital is at risk. Past performance is not an indicator of future gains. Please note, that while a company may have a history of paying dividends, there is no guarantee it will continue to do so in the future.
