Are these the best yielding dividend stocks in the UK?

How to trade or invest in dividend stocks

1. Learn more about dividend stocks
2. Decide whether you want to invest or trade
3. Open an account
4. Search for your chosen dividend paying stock on our app or web platform
5. Make your investment or trade

When you invest, you buy and hold stocks over an extended period of time with the view that they’ll increase in value. By holding dividend stocks and either reinvesting, or keeping the dividends, it pays out, you can build wealth overtime and earn both a growth and passive income.

Trading a more short-term view and looks to take advantage of smaller market movements. It uses leverage which enables you to take a position much larger than your initial deposit.

For example, with 5:1 leverage, you could open a £5,000 position while only depositing £1,000 as ‘margin’. A 10% market movement could result in a 50% gain or loss on your deposited margin.

It’s worth noting however that market movements can be unpredictable and whilst negative balance protection prevents you from losing more than your initial deposit, you could still lose the full amount you put in.

Best UK dividend yielding shares to watch

What are some of the best dividend-yielding shares worth watching? Here are some of the shares we think are worth a closer look. Note that these stocks are the highest yielding UK shares with a dividend cover ratio of 1 or higher. Past performance is not a guide to future performance. Always do your own research.

M&G – dividend yield: 9.30%

• Most recent dividend: 6.60p
• Latest dividend payment date: 18 October 2024

M&G reported stable H1 results where positive market movements helped assets under administration increase from £333 billion to £346 billion year— on— year. Underlying operating profit exceeded expectations, although it 4% to £375 million.

Looking ahead, the savings and investment company plans to expand its Asset Management and Wealth division, aiming for a contribution of 50% to overall profits, whilst slowly phasing out its annuity portfolio and legacy products.

Last October M&G paid out an interim dividend of 6.60p to shareholders. With a cover ratio of 3.8, the company appears to be well positioned to continue with dividend payments throughout 2025.

Our analysts have given the stock a buy rating with an average price target of 222p in the next 12—month period, up 3.77% from its current value.

Vodafone – dividend yield: 8.32%

• Most recent dividend: 2.25¢
• Latest dividend payment date: 7 February 2025

Vodafone’s Q3 results came in better than expected with revenue growth increasing by 5% year— on— year to €9.8 billion where growth in Turkey, Africa and Other Europe, helped to offset weaker sales in Germany.

The company isn’t immune to the key challenges impacting the telecom sector at the moment with low sales growth relative to spending being a big one. To help overcome this, Vodafone has restructured by cutting jobs and has agreed to merge its UK business with Three. These changes are positive but investor sentiment remains cautious, a view that is likely to continue if its performance in Germany doesn’t improve.

On 7 February the company distributed a dividend of 2.25¢ per share to shareholders. This dividend payment was reduced from 4.50¢ the year before after selling its Spanish and Italian operations. Vodafone has a dividend cover ratio of 6.04, which indicates that the company has enough cash to continue paying dividends over the next year.

Our analysts have given the stock a hold rating with an average price target of 83p, up 25% from its current value.

British American Tobacco – dividend yield: 6.94%

• Most recent dividend: 58.88p (paid quarterly)
• Latest dividend payment date: 3 February 2025

Despite its best efforts, British American Tobacco PLC (LSE) is unlikely to appear in any ESG fund (environmental, social, governance) investment portfolio. However, as an income seeker’s stock it’s desirable as the company pays a generous dividend.

In 2024 the company saw sales increase by 1.3%, with revenue from New Category products up almost 9%. Across the US, sales from traditional smoking products continue to decrease, posing a threat to BATs profit margins. To overcome this, the company are looking to move customers onto its next generation vapes products. However, new legislation banning/ limiting consumer access to these New Category products may be introduced by many governments. If this happens BATs profit will be negatively impacted.

The company have recently announced a dividend of 60.06p which will be paid out to shareholders in May this year.

Land Securities Group- dividend yield 6.86%

• Most recent dividend: 9.40p
• Latest dividend payment date: 8 January 2025

Land Securities Group reported stable FY24 results which was largely driven by its decision to invest in its top 12 — quality assets to generate solid income and growth, whilst also selling £3.1 billion worth of its lower value properties.

With its office spaces at just over 93% occupancy and its retail at 95%, its clear that despite broader market challenges the company’s properties remain in high demand. This has enabled the real estate company to offset increased finance expenses and rental income increased by 3%.

Earnings remained stable year— on— year at £371 million and its total dividends increased by 2.6% to 39.6p. With a dividend cover ratio of 1.32, the company is in a good position to continue dividend payments throughout 2025.

Our analysts have given the stock a buy rating with a predicted price target of 694p, up 17% from its current value.

Rio Tinto - dividend yield 6.82%

• Most recent dividend: 177.00¢
• Latest dividend payment date: 26 September 2024

Rio Tinto delivered strong H1 results with operating cash flow reaching $7.1 billion and underlying earnings reached $5.8 billion, this was in line with market expectations.

Although the lithium market is currently oversupplied, the rising demand for Electric Vehicles (EVs) is expected to change this and it could drive long—term demand for lithium and positively impact the company’s financials.

To help increase its presence in the battery minerals sector, the mining company has agreed to purchase Arcaduim Lithium for $5.85 per share.

In September last year the company paid out a dividend of 177.00¢ per share to shareholders. With a dividend cover ratio of 2.39 it’s likely dividend payments will continue throughout 2025.

Our analysts have given the stock a buy rating with a predicted price target of 76475p in the next 12—month period, up 1413% from its current price.

British Land - dividend yield 6.25%x

• Most recent dividend: 12.24p
• Latest dividend payment date: 15 January 2025

Real estate company British Land reported a strong performance in 2024 where underlying profits increased by 2% which was largely driven by good cost control. As a result, the company has increased its dividend payment from 12.16p to 12.24p per share. This was paid to shareholders on 15 January.

With interest rates stabilizing and demand for office space beginning to increase, the company is well positioned for future growth if market conditions remain favourable. Looking forward, British Land aims to prioritise high growth areas such as retail parks and campuses.

Our analysts have given the stock a buy rating with an average price target of 445p in the next 12 months, up almost 20% from its current value.

Londonmetric Property - dividend yield 5.90%

• Most recent dividend: 2.85p
• Latest dividend payment date: 13 January 2025

Real estate investment trust LondonMetric has reported a strong start to FY25 with H1 results showing net rental income increasing by 154% to £193 million and EPRA earnings up 155% to £135 million. This success was largely due to mergers and acquisitions which took place in FY24.

Looking ahead, LondonMetric is confident in its earnings potential and has issued a 2nd interim dividend of 2.85p, up 15% year—on—year. With a dividend cover ratio of 1.26 the company seem to be in a strong position to continue dividend payments throughout 2025.

Our analysts have given the stock a strong buy rating with an average price target of 224p over the next 12 months, up 16% from its current price.

Schroders- dividend yield 5.99%

• Most recent dividend: 6.50p
• Latest dividend payment date: 26 September 2024

Asset management company Schroders reported a record number of assets under management (AUM), bringing in £777.4 billion during Q3.

This strong performance was mostly due to impressive investment gains and favorable market conditions where client investment and wealth management divisions performed particularly well.

Despite this, outflows reached £2.3 billion, with more expected into Q4.

The company’s most recent dividend payment of 6.50p remains consistent year—on—year.

Schroders has recently announced a partnership with savings and retirement business Pheonix Group which would increase their presence in the private markets. Going forward, it’ll be interesting to see the impact this has upon stock performance and future dividend payments.

National Grid - dividend yield 5.68%

• Most recent dividend: 15.84p
• Latest dividend payment date: 14 January 2025

UK based energy company National Grid reported stable H1 results with operating profit reaching £2 billion, up 15% year—on—year. This was largely driven by increased revenues in UK Electricity Transmission and higher rates in New York. Despite this, revenues were down 6% to £8 billion after the UK Electric System Operator was sold.

Looking ahead, National Grid are planning to heavily invest in energy infrastructure that’ll enable the company to position itself at the forefront of the energy revolution. To help fund this its dividend was reduced slightly. But, with a dividend cover ratio of 4.10 the company seem well positioned to continue dividend payments throughout the next year.

Our analysts have given the stock a buy rating with an average price target of 1141p per over the next 12 months, up almost 20% from its current value.

BT Group- dividend yield 5.60%

• Most recent dividend: 2.40p
• Latest dividend payment date: 5 February 2025

Telecommunications company BT reported stable H1 results where they brought in a revenue of £5.1 billion, down 2% year-on-year due to declining sales in its business segment. Openreach, the division responsible for broadband network, was the only one to see revenue growth.

Lower revenue also contributed to a 3% drop in profit before tax where the company brought in £520 million.

Its recent dividend payment of 2.40p per share which was paid to shareholders on 5 February this year is up from 2.31p the previous year.

The company’s full year guidance remains unchanged, with revenue expected to fall by 1—2% and its cash profit should reach £8.2 billion.

Going forward, BT aims to modernise its operations and build new infrastructure which should result in lower costs and increased growth. Challenges with its Business division and the need to offset declines in older services through generating growth will also need to be handled.

How to invest in best dividend stocks in the UK

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1. Create an account with us: you’ll get access to over 13,000 stocks, 2000 ETFs, investment trusts and more
2. Buy shares: once you’ve chosen your shares, purchase them on your share dealing account and monitor your investment
3. You can also trade shares using spread bets or CFDs, which means you won’t own the underlying asset, but you can speculate on upward or downward share price movements

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Dividend stock investing strategy: what you need to know

Dividends are often viewed as a crucial element of a strategy, providing a regular stream of income, or used to buy more shares in a company (a process known as reinvesting). The difference in an investment’s return based on capital appreciation only can be drastically different from that including the returns from dividends.

However, dividends shouldn’t be the sole reason for investing in a company, but rather a bonus element to the key requirement of selecting a company with strong fundamentals and or a bullish price trend. It’s also important not to pick companies based on dividend yield alone, since dividends can be reduced or increased.

Usually, a well-managed company will look to pay dividends as a way of demonstrating its financial strength and attractiveness for investors, but there’s a risk that companies may pay out dividends from cash reserves rather than from profits.

A very high dividend yield, usually above 7%, could be a red flag for investors. Usually, dividend yields increase sharply when a share price drops, since the dividend yield is calculated as: (dividend per share divided by share price) x 100. Such drops prompt a sudden increase in the yield without increasing the amount paid out in dividends.

Companies that see sharp increases in yields are often tempted to cut the dividend as a result, since the yield can still be kept to an attractive level (2% to 3%), but money can be saved in terms of reduced dividend pay-outs.

Choosing dividend-paying companies for a potential investment thus requires an extra level of work beyond looking at the financial statements or examining the price chart. It’ll mean investors must look at the level of dividends, their growth (or otherwise) and how these are funded. In particular, the dividend coverage ratio is key.

This is calculated by dividing net profits by the dividend to produce a ratio. Above 1 signals that the dividend is at least covered fully by profits and that existing cash reserves aren’t being used to pay dividends. Below 1 is also a potential red flag, since it shows profits don’t cover the pay-out and thus cash reserves are employed to maintain the dividend. This runs the risk of a dividend cut or cancellation of the entire payout.

How to identify the UK’s best dividend stocks

There are a few steps you can follow to identify the UK’s best dividend stocks:

1. Use a market screener
2. Analyse past dividend payments
3. Learn more about the company

Use a market screener

You can use online resources such as a market screener to look for companies with a proven track record of delivering dividends. A screener also makes it easy to compare high-yield dividend stocks against each other. This way, you can choose the stocks that best suit your risk profile.

Analyse past dividend payments

By analysing past dividend payments, you can get a sense of how the company prioritises them. Some companies may be so committed that they dip into cash reserves to keep investors satisfied, while others do the opposite and use dividend funds to pay for day-to-day activities.

If past dividend payments were very high and earnings were low, it could be a red flag. That’s because a company that spends too much on dividends maybe harming future growth. You can use ratios such as the dividend coverage ratio to determine the health of a company’s dividends.

Learn more about the company

Dividends are affected by several factors, so it’s important to learn as much about the company as possible. This includes share price activity, fundamentals and all corporate actions. These factors will help you establish a company’s overall health, as well as the prospects for dividend payments.

Read more about fundamental analysis

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