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3 top UK dividend stocks to buy now

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·3-min read
Compass pointing towards 'best price'
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Last year was a grim time for income investors as many payouts were cut. But as the world returns to normal over the next few years, I think the income available from shares should increase. I’ve been hunting for UK dividend stocks to buy now. In this piece, I’m going to look at three companies that are on my watch list.

Record sales

Housebuilder Redrow (LSE: RDW) reported record half-year revenue for the six months to 31 December. By mid-February, the company had already sold more than 95% of the houses it expects to complete by 30 June.

This builder is one of my top picks in this sector. Redrow has a solid track record and is still part-owned by founder Steve Morgan, who controls a 16% stake. In my view, founder ownership is often a good indicator that management will take a prudent, long-term approach to growth.

I also think Redrow’s share price looks reasonable. The stock trades at 1.3 times book value, a lower multiple than some rivals. Priced at 10 times forecast earnings, with a 3% dividend yield, I think this stock still has room to grow.

Of course, a housing market slump remains a risk. I think that we could see an economic slowdown when pent-up spending slows later this year. Even so, Redrow is one UK dividend stock I’d buy now.

A new choice for high yield investors?

One company that’s on my watch list at the moment is telecoms group Airtel Africa (LSE: AAF). This business operates mobile networks and payment services in sub-Saharan Africa.

Airtel only floated on the London market in 2019, so it doesn’t yet have a long track record as a UK-listed company. This is the only real reason why I haven’t bought this UK dividend stock for my portfolio already.

However, I’ve been watching closely and have been impressed by Airtel Africa’s performance so far. Revenue rose by 14% to $3,908m last year, while pre-tax profit was 17% higher at $697m.

This growth rate is a key attraction for me — I believe African markets should continue to grow strongly for years to come. By contrast, European groups such as Vodafone and BT are struggling to boost sales and profits. This is limiting the growth of their dividends.

Airtel Africa shares trade on 11 times forecast earnings for the current year, with an expected dividend yield of 4.9%. That looks tempting to me.

A UK dividend stock I’d buy now

FTSE 100 packaging group Mondi (LSE: MNDI) delivered a solid performance last year, thanks to strong demand for e-commerce packaging. Over the next year I expect to see a more balanced performance, with the group’s industrial products also gaining sales.

The company’s latest update suggests that trading so far this year is in line with expectations. That puts the stock in 16 times earnings, with a forecast yield of 3.1%.

One potential concern right now is that the company has reported rising costs in a number of areas. This could put pressure on profits if customers won’t accept price rises. However, Mondi is a large and experienced operator with a diverse mix of customers. I don’t expect this to be a serious problem.

Indeed, I expect Mondi’s business to return to steady growth from 2021 onwards. In my view, this could make it a great UK dividend stock to buy now.

The post 3 top UK dividend stocks to buy now appeared first on The Motley Fool UK.

More reading

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Redrow. 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 2021

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