If you’re thinking about becoming an investor, or you already are, but you’re considering reviewing your options, here in this article, we point the way below, toward what some people believe to be a few of the best dividend stocks UK investors can access that are supposedly safe, high-yielding, and good long term investments.
Best Dividend Stocks UK 2023: Summary Table
|🎯 Main aims when buying stocks?||• Growth in the price of the stock|
• Receiving dividend payments
• Gaining voting rights if the company grants them
|☝️ Most important thing to remember?||Always check that the company’s earnings and revenues are growing|
|❓ Should I worry about the risks?||That really depends on your risk profile, but no investments are 100% safe|
|🏆 Some top dividend stocks?||• Imperial Brands (IMB)|
• British American Tobacco (BATS)
• Phoenix Group Holdings (PHNX.L)
You should have several aims in mind when you buy stocks (also referred to as shares or equities).
- Growth in the price of the stock
- Receiving dividend payments
- Gaining voting rights if the company grants them
Voting rights are not significant for many investors. Usually, voting becomes more meaningful to you when you hold a substantial stake in a business’s equity.
The stock price is always important, as this is why most investors decide to buy a particular share because they believe it is safe and that the share price will rise.
But dividends are essential too. They are paid to shareholders when the company makes a profit. A dividend payout can be issued annually, six-monthly, or quarterly. The payouts are usually in cash but can also be paid in shares or property. The top dividend-paying stocks UK investors hold are highly sought after on the stock market.
10 of the best dividend stocks right now
It isn’t easy to pick the 10 absolute best dividend stocks UK investors should be buying today for several reasons. There is the ongoing COVID-19 pandemic to consider, the steep rise in fuel and energy costs, and the Russian invasion of Ukraine. Seldom have times been more turbulent, so if you are a newbie investor, don’t be too shy to seek investment advice.
If you’re looking for good stocks to buy in 2023, some of the best dividend-paying stocks for UK investors according to cmcmarkets include:
- British American Tobacco
- Imperial Brands
- Legal and General
- Phoenix Group Holdings
- Polymetal International
As you can see, these top 10 dividend stocks for UK investors are spread across many industries, from construction to consumer goods, insurance to oil and gas, and pharmaceuticals to precious metals.
Trading platforms for dividend stocks
Whether you are considering high yield UK stocks or shares in offshore companies around the globe, there are many online trading platforms you can use. They include:
- IG Share Dealing
- Interactive Investor
Here are many more besides the ones listed above. To pick the right one for you through which to access the highest paying dividend stocks UK investors can buy, you will have to do your own due diligence. You can compare the minimum deposits required, the price per trade, and the platform and management fees, which will essentially impact your bottom line. Seeking good dividend growth and top dividend-paying stocks is no simple matter.
How to select high dividend shares UK
The stock market is notoriously volatile. So, before you get into investing, you need to be aware that your investments can fall and rise, and if you have to withdraw them for some reason when the market is at a low, you could lose out significantly.
One school of thought is that UK investors’ best high dividend shares are those issued by the more mature dividend-paying enterprises as they have an excellent year on year dividend payout track record. But even these reliable dividend payers can fail to offer a high dividend yield in the face of extraordinary events like pandemics and wars.
The ways of searching for the safest dividend stocks UK investors can buy include:
- Checking that the company’s earnings and revenues are growing
- Making sure the company isn’t heavily indebted
- Looking for a history of dividends increasing
- Checking the enterprise’s dividend cover (earnings per share divided by dividends per share)
- Checking the company’s payout ratio (dividends per share divided by earnings per share)
As you can see, dabbling in high yield shares UK investments is not simple. First, you have to understand the workings of the stock market and know what you’re doing.
Taxation on the best dividend shares UK investors own
As with most forms of income here in the UK, HMRC takes it cut, so bear in mind that the best dividend funds UK investors receive are not taxed at source. From 6 April 2022 to 5 April 2023, the first £2,000 worth of annual UK dividends from investments are currently free of tax. After that, you owe the taxman:
- 8.75% tax if you are a basic rate taxpayer
- 33.75% tax if you are a higher rate taxpayer
- 39.35% if you are an additional rate taxpayer
Special dividends also form part of your income. However, there is another way of owning high yield UK stocks without being taxed – and that is if they are held in a Stocks and Shares ISA.
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As with all investing, your capital is at risk. T&Cs and ISA rules apply.
Stocks and shares (Investment) ISAs
There are many ways on how to invest money. You can open savings accounts, save into a pension, acquire top dividend stocks UK investments, and open various ISAs – Cash, Innovative Finance, Lifetime, and Investment (Stocks and Shares) ISAs. The great thing about ISAs (all types) is that they are tax wrappers.
Not only is any growth tax-free, but you also are not taxed on withdrawals, nor are taxed dividend income. If you are wondering how to invest 100K or more, ISA investment portfolios containing the top dividend shares UK investors can access are one of the best options open to you. You can save yourself a considerable amount of money by not having to pay taxes.
The big problem with putting your money into savings accounts rather than investing is that it devalues in real terms, year on year, although your money is safe.
According to Moneysavingexpert, even with the best fixed-rate savings accounts, you are unlikely to get more than around 3.8%, and that is a three-year rate. Considering that the latest inflation figure just announced is 6.2%, if you have one of the higher interest rate fixed-rate savings accounts, your money is being devalued at 3.8% per annum in real terms. Many people have savings in accounts that earn less than 1% interest per annum.
The best dividend stocks UK investors can have in their Stocks and Shares ISAs can earn significantly more, but there is an element of risk.
Although Stocks and Shares ISAs are riskier, that risk has to be put into perspective, and you can do several things to mitigate it. The first thing you have to do is evaluate how risk-averse you are. If you can’t tolerate any risk whatsoever, go down the saving rather than investing route. If you are investing, you have to accept that your money, safe though it is, will lose value in real terms.
If you are prepared to accept some element of risk, you must then decide how much, and you can select from a range of different risk investment portfolios.
Selecting your risk tolerance is one mitigation aspect; the others are diversification and long-term investing.
When we talk about long-term investing, we mean durations of no less than five years. As far as diversification is concerned, the best dividend stocks UK ISA portfolios possess have inbuilt diversification according to the risk level.
Also, don’t forget that UK dividends are tax-free as long as the dividend income falls within your personal allowance and dividend allowance, including any special dividends in your end-of-year dividend total.
Finding the right personal wealth management specialist
Finding the right online investment advisor and digital wealth management company is also important. There are plenty of scam merchants around, so make sure that whomever you choose to help you find the best high dividend stocks UK investors can have in their portfolios is authorised and regulated by the Financial Conduct Authority.
What is a dividend?
A dividend is an annual payment made by a corporation to its shareholders. It is usually calculated as a percentage of the company’s net profit.
What shares pay the best dividends in the UK?
Some of the shares that pay the best dividends in the UK include British American Tobacco (BATS), Imperial Brands (IMB), GlaxoSmithKline plc (GSK), and Anglo American (SA).
How dividends are taxed in the UK?
If you’re earning dividends from shares that fall within your personal allowance, you don’t need to pay any taxes on them. You also receive an annual dividend allowance. However, you only pay taxes on any dividends received above the annual dividend allowance. Also, dividends from stocks and shares ISA aren’t taxed.
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