The 15 best dividend stocks UK in 2023

Persimmon is a British house-building company with headquarters in York. Persimmon is made up of 31 regional operating businesses and builds homes in over 380 locations worldwide. It is one of the UK's most successful house builders.

Rio Tinto is an Anglo-Australian mining corporation. It's one the world's largest miners, producing assets such as iron ore, diamonds, gold, copper, and uranium. The company has joint headquarters in London and Melbourne, where it's also listed on the ASX. It works on an international level across 35 countries.

Vodafone is the largest mobile and fixed network operator in Europe by number of subscriptions and has the largest 5G network on the continent. The telecommunications company serves more than 42 million customers worldwide.

M&G is an investment management company headquartered in London. It deals primarily with equities, portfolio management, fixed income and real estate, both in the UK and overseas. The company is fairly new to the FTSE 100, only registering on the London Stock Exchange in 2019 after a demerger from its parent company, Prudential.

Barratt is the leading housebuilder and property development company in the UK. The aim of the business is to acquire land, obtain planning consents and build high-quality homes, which it then markets and sells to customers.

Phoenix Group Holdings is one of the largest insurance providers in the UK. The company specialises in the acquisition and management of life insurance and pension funds. Founded in 1857 as The Pearl Loan Company, it has acquired multiple companies since then, including Standard Life Assurance and ReAssure Group.

Another housebuilding company, Taylor Wimpey offers a wide range of homes from small and affordable apartments to luxury six-bedroom houses across the UK and Spain. It has an environmentally friendly stance which makes it a popular choice for ESG investors in particular.

Legal & General is a financial services company that deals with pensions, lifetime mortgages, annuities and investments for more than 10 million clients worldwide. It has headquarters in the City of London.

British American Tobacco is the largest tobacco company in the world based on net sales, retailing cigarettes, tobacco and other nicotine-related products. It operates the brands Lucky Strike, Kent and Dunhill, and Pall Mall.

Imperial Brands is one of the largest tobacco companies in the world when measured by market share. Founded in 1901, it owns popular brands such as Golden Virginia, RizLa and JPS, producing over 320 billion cigarettes per year in 51 factories.

Abrdn (formerly known as Standard Life Aberdeen) is an investment company that manages global assets including equities, real estate, and private markets. It's one of the largest active asset managers in the UK with headquarters in Edinburgh, Scotland. The company was formed from the merger of Standard Life and Aberdeen Asset Management in 2017.

Antofagasta is a copper mining company based in Chile with headquarters in London. It carries out mining and exploration activities and also has interests in transport, mainly rail and road cargo. The company owns and operates four mines in central and northern Chile.

Anglo American is a leading British mining company founded in 1917 with headquarters in London. It accounts for around 40% of the world’s newly mined platinum and also mines iron, diamonds, copper and nickel. The company has operations and projects across 15 countries and 56 sites.

BT’s roots date back to 1846 with the founding of the Electric Telegraph Company. It’s one of the largest providers of broadband and mobile services in the UK with a presence in more than 180 countries.

Aviva is a leading British insurance company specialising in retirements and pensions, savings, fund management, and life insurance services. The company was founded in 1696 with headquarters in London. It serves over 18 million customers through its core markets.

They may sound appealing so far, but exactly what are dividend stocks?

This term describes companies that regularly share profits with their shareholders. While most companies just make (or lose) traders’ money on their market performance, others can give their shareholders a regular payout of cash, or further shares. This both rewards the shareholders for their support and sends a signal from a successful company to attract more investors.

The payout typically happens four times a year following the company’s quarterly earnings statement. However, because it’s based on profits, the amount is not guaranteed, and in poor-performing quarters, it may not be paid at all.

How much a company will pay is determined by the board of directors, who will consider the previous year’s profit and losses, and then come to a decision on what amount they can afford to pay out to the shareholders and what must be reinvested. Some firms choose to pay very low dividends to their shareholders to be able to retain most of their profit and concentrate on the growth of the company, whereas high dividend stocks may attract more investor attention if they are in slow growth industries, such as consumer staples or real estate.

Another way companies deliver value back to their shareholders is via share buy backs, which is akin to a dividend but instead of a pay-out per share the company uses their profit to buy back shares in the open market, which reduces the supply of shares, in turn boosting the stock price for the existing shareholders.

While trading derivative products (such as spread bets or CFDs) mean that you don’t get the dividend from the share itself — because you don’t own it — you receive or pay an adjustment, as long as you have bought or sold at the right time.

In each quarter is a date of record, in which companies check and confirm their lists of shareholders. The day before this is known as the ex-dividend date, a cut-off point when the right to dividends passes from the seller to the buyer. To be eligible for the next yield, you must buy the stock and own it by the close of trading one business day before the ex-dividend date. If you buy on the ex-dividend date or later, the seller will receive the next dividend and you will not be eligible to receive any until the following quarter.

Share prices can be impacted by corporate actions, which in this case means when the company pays out to its shareholders. When a stock goes ex-dividend, the value of that stock effectively falls by the dividend amount, and therefore impacts any spread bet position you hold in that company.

If you have gone long (bought with the intention of selling higher), this payout will have reduced your position, so we would credit your account with the dividend amount. If, on the other hand, you had shorted the stock​ (sold with the intention of buying back cheaper) you would have benefited from the drop in the price. As a result, the equivalent amount would be deducted from your account, which means you don’t lose or gain anything from the adjustment.

Learn more about these types of corporate actions​.

Dividend shares that deliver consistent growth are, unsurprisingly, very popular — but choosing the right ones still needs careful thought. Even the best dividend stocks are vulnerable to cuts, missed payments, dividend elimination and share price crashes. When choosing stocks, you should consider the following.

Income stocks should show year-on-year consistent profitability, as a financially stable company is inevitably more likely to pay out a regular yield and there are unlikely to be cuts or payout problems in the future.

This represents the relationship between a company’s income and its dividends, so these should usually show a positive correlation. By comparing these metrics, you can start to establish if the current rate is sustainable. For example, companies with a high payout ratio yet declining profits may pressure themselves to continue to pay that level of dividend to prevent investors from going elsewhere.

This is a helpful figure in determining a company’s capacity to pay dividends out of its profit in any given period. It demonstrates how many times the company could pay out (cover) its yield with the profits available.

Dividend cover = earnings per share (EPS) / dividend per share (DPS)

A ratio above 1.0 is considered healthy, although many companies aim for a cover of 2.0 to ensure they use their capital efficiently and sustainably. Any ratio less than 1.0 suggests the current payouts are not sustainable and the dividend may be at risk of being cut.

Looking at a company’s previous profits and dividend information can be a reliable indicator of the stock’s volatility. If a stock has a history of paying high yields on time and consistently increasing the dividend, it can be classified as a stable income stock. Although slow and steady growth may not be exciting, combining the reinvestment of dividends and compound interest can provide great returns.

Stocks that pay a high yield do not necessarily mean the company is doing well. A more reliable indicator is whether the company’s EPS is growing. Therefore, it is necessary to look at more than just dividend growth when assessing a company’s performance.