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7 UK dividend stocks I’d buy today for a 4%+ passive income

Edward Sheldon, CFA
·4-min read
Hand holding pound notes
Hand holding pound notes

Dividend stocks are popular among those seeking passive income right now. It’s not hard to see why. With UK interest rates at 0.1%, picking up an attractive rate from a UK savings account is pretty much impossible. However, with dividend stocks, it’s possible to earn a yield of 4%+.

Here, I’m going to highlight seven UK dividend stocks I’d buy today. The average yield on these stocks is 4.3% meaning that combined, they could offer a much higher level of passive income than a savings account, albeit with a higher level of risk.

Dividend stocks for passive income

My favourite sector for dividend stocks is consumer staples. Companies in this sector tend to be quite resilient. This means they are often reliable dividend payers.

The standout dividend pick in this sector right now, in my view, is Unilever. It owns a world-class portfolio of food and drink, personal care, and home care brands. Currently, ULVR shares offer a prospective dividend yield of around 3.5%. In today’s low-interest-rate environment, I see that yield as very attractive.

I also like Reckitt Benckiser and Diageo, however. The former owns a range of health and hygiene brands and is benefiting from the increased focus on hygiene today. The yield here is currently about 2.8%. Meanwhile the latter is a leading alcoholic beverage company. Its yield is only 2.4%. However, the company has a fantastic dividend growth track record – it has lifted its dividend every year for the last 20 years. Given this track record, I think it’s a good dividend stock for passive income.

5%+ yields

Healthcare is another sector that can be a nice source of dividends. The demand for healthcare tends to remain pretty stable irrespective of economic conditions, which again, translates to reliable dividends. In this sector, I think GlaxoSmithKline looks attractive from a passive income point of view right now. It is forecast to pay out 80p per share in dividends this year. At the current share price, that equates to a yield of about 5.8%.

Turning to the industrials sector, BAE Systems stands out to me as a solid dividend pick. It’s a leading defence company that has been quite a reliable dividend payer over the years. One reason for this is that a large proportion of its revenues are government-backed. Currently, the prospective yield here is about 5.2%.

In the financial sector, one of my preferred plays is Legal & General Group. It’s a leader in insurance, investment management, and retirement solutions. It has put together a solid dividend track record over the last decade. Unlike many other financial stocks, it didn’t suspend its dividend last year. Currently, LGEN offers a prospective yield of about 7%. Looking ahead, the company says it plans to increase its dividend gradually over time.

Finally, I see Tritax Big Box as another top dividend stock today. It’s a real estate company that owns a portfolio of logistics warehouses. The forward-looking yield here is about 3.6% at present.

Dividend stocks: the risks

In summary, building a passive income with dividend stocks today is not hard. Of course, it’s important to remember that dividends are not guaranteed. Companies can cancel, suspend, or cut their payouts at any time. Share prices can also fall meaning investors may get back less than they invested.

As with any form of investing, a focus on risk management is sensible.

The post 7 UK dividend stocks I’d buy today for a 4%+ passive income appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Unilever, Diageo, Reckitt Benckiser, Legal & General, Tritax Big Box REIT, GlaxoSmithKline, and BAE Systems. The Motley Fool UK has recommended Diageo, GlaxoSmithKline, Tritax Big Box REIT, and Unilever. 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