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3 top dividend shares I’d buy for a tough 2023

Front view photo of a woman using digital tablet in London
Front view photo of a woman using digital tablet in London

I’m searching for the best dividend shares to buy for passive income next year. Here are three I’m aiming to buy if I have spare cash to invest.

H&T Group

Dividend yield: 5%

Pawnbrokers like H&T Group (LSE:HAT) can help investors protect their wealth during tough times like these. Pre-tax profits rose 43% in the six months to June, latest financials showed. The likelihood of a long recession suggests demand for its services should remain strong.

H&T plans to rapidly expand to maximise this opportunity too. In September, it raised £17m via a share placing to help it keep “growing the pledge book and expanding the store estate”. The business increased store numbers to 261 in the first half, a yearly increase of seven.

I also like this AIM business on account of its strong dividend coverage. Predicted payouts are covered 2.5 times by expected earnings, providing a wide margin of safety for investors.

I think H&T is a great way for me to de-risk my portfolio, even though future changes to FCA regulations could threaten profits.

Vodafone Group

Dividend yield: 7.6%

Telecoms businesses enjoy broadly stable profits at all points of the economic cycle. Businesses need to remain connected and consumers can’t bear giving up their mobile phones.

This is why I’d buy Vodafone Group (LSE:VOD) shares for what could be a difficult 2023. I’d buy it for dividends even though ultra-competitive market conditions pose a threat to earnings.

You see, the FTSE 100 business is an impressive cash-generating machine. This gives it the firepower to pay big dividends year after year and even during tough periods. Vodafone expects to deliver adjusted free cash flow of at least €5.3bn in the current financial year (to March 2023).

Vodafone gave its balance sheet an extra boost last week too by agreeing to sell a stake in its towers unit to KKR and Global Infrastructure Partners. The deal will raise at least €3.2bn for the company to pursue its growth programmes and furnish its shareholders with market-beating dividends.

Bank of Georgia Group

Dividend yield: 8.5%

UK-focused banks like Lloyds and Barclays face a perfect storm. The Bank of England thinks Britain’s GDP will be in decline for the next 18 months, or so. It has also suggested that interest rates might not rise as high as the markets expect.

This is why I’d rather buy banking stocks that operate in overseas territories. And I believe Bank of Georgia (LSE:BGEO) is a great one to buy to boost my passive income next year.

Unlike the UK, Georgia isn’t a mature market when it comes to financial products. This gives it plenty of room to grow as GDP in the Eurasian nation soars. The economy grew 10.2% in the first nine months of 2022, government data shows.

I’m also attracted to Bank of Georgia because of its excellent dividend cover. 2023’s estimated dividend is covered 3.4 times by expected earnings. I’d buy it even as it faces stiffening competition from FTSE 250 rival TBC Bank.

The post 3 top dividend shares I’d buy for a tough 2023 appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Lloyds Banking Group, and Vodafone. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2022