This year has generally not been a great one for dividend shares. Many of the best yield-paying FTSE 100 firms were forced to cut or suspend their payouts. However, as we head into 2021 with a vaccine being rolled out, things may be looking up.
What do I look for in dividend shares?
When choosing the best dividend shares, I consider a number of criteria. I want my capital to be safe, so I look for solid firms with good brands and good financial history. I want to have seen consistent dividend growth, though 2020 is a blip I can forgive. Then, of course, I want something that is yielding well right now. With that in mind, here are my top three UK choices right now.
I have long been a fan of BAE Systems (LSE: BA), as the defence contractor has a good history of dividend payout. While the firm doesn’t make as many headlines as other companies, it has been a solid performer for many years.
Its future for the next few years also seems to have good prospects. Recently the German government approved the purchase of 38 Eurofighters, while the UK government has also announced its intention to increase defence spending.
At about 4.5%, BAE is not offering the highest yield available right now. However, I think it is one of the most stable. This alone makes it my top choice of UK dividend shares right now.
BP (LSE: BP) is another one of my top dividend shares right now, and also one of my top picks for growth in the coming year. Though it cut its dividend earlier this year, at it current share price it is still yielding in the 8% range.
Oil prices have dominated BP’s share price for the most part this year. Covid-19 sparked a sell-off in a market that was already scared. With a vaccine and some bolstering moves from OPEC and Russia, I think crude should see some strength return in 2021.
Personally I think BP has been oversold for the most part because of Covid-19, and as this chapter draws to a close, the BP share price should bounce back to where it truly belongs.
Last but not least of my choice of dividend shares is GlaxoSmithKline (LSE: GSK). Though I think Covid-19 vaccines will have little immediate benefits in terms of profits for Big Pharma, I think in the long run it will. An increase in both public interest and government spending on vaccines and pandemics should help the industry as a whole.
While there are pharmaceutical companies that I think have more growth potential, GSK is the clear choice for me, thanks to its almost 6% yield.
The post The three dividend shares I would buy today appeared first on The Motley Fool UK.
Karl has shares in BAE Systems and BP. The Motley Fool UK has recommended GlaxoSmithKline. 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 2020