Each month, we ask our freelance writers to share their prime concepts for dividend shares with you — right here’s what they mentioned for September!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
BP
What it does: BP operates throughout the vitality worth chain, together with manufacturing, refining, buying and selling and retail.
By Andrew Mackie. The BP (LSE: BP.) share value could have been heading decrease over the previous few months, however I see nothing to alter my bullish long-term view on the corporate.
In Q2, it hiked its dividend per share (DPS) 10% to eight cents. Certainly, over the previous three years, DPS has risen 52%. Regardless of these bumper returns, it nonetheless trades at a lowly ahead price-to-earnings ratio of eight, one of many lowest within the sector.
Again in 2020, when oil costs turned destructive, nobody was excited about investing in oil. I consider it’s the identical immediately. One of many most important causes is an absence of demand from China, the manufacturing plant of the worldwide economic system. However regardless of this, oil costs proceed to stay buoyant. One motive is that demand is coming from a building increase within the US, pushed by onshoring of producing functionality.
A requirement shock brought on by a recession stays a transparent short-term danger to the BP share value. However, historical past exhibits that commodities companies do properly in inflationary environments. And regardless of the rhetoric from Central Banks, such because the Federal Reserve, the battle in opposition to inflation is, in my view, removed from gained.
Andrew Mackie owns shares in BP.
Howden Joinery
What it does: The UK’s main producer of fitted kitchens, bedrooms, and joinery merchandise within the house renovation market.
By Zaven Boyrazian. Renovation hasn’t been on the prime of most family precedence lists of late. In spite of everything, with increased rates of interest and inflation placing strain on household budgets, it’s an expense that many have delayed.
But regardless of these headwinds, Howden Joinery (LSE:HWDN) has sucessfully retained its prime and backside line enlargement from the lockdown market increase. Its newest outcomes present income nonetheless 48% forward of pre-pandemic ranges on the again of recent product launches, exercising pricing energy, and optimising operations.
Progress has slowed. With many households ready for decrease rates of interest earlier than kickstarting their renovation tasks, development could be making a comeback in 2025. And margins stay a few of the highest within the trade
Clearly, this all will depend on how the economic system behaves. The longer it takes for the Financial institution of England to considerably carry down charges, the longer Howden must function in an unfavourable setting. And the agency could slowly run out of steam.
However, with ample money on the books and a strong monitor report, it’s a danger value taking, in my view.
Zaven Boyrazian owns shares in Howden Joinery.
NatWest Group
What it does: NatWest Group is a set of banks, together with NatWest, Coutts and RBS.
By Jon Smith. It’s not simply the 55% acquire within the share value over the previous 12 months that makes me wish to purchase NatWest Group (LSE:NWG) shares. The dividend yield is 5.06%, properly above the FTSE 100 common.
Heading into the autumn, I feel the inventory might hold doing properly. It’s because I count on two extra rate of interest cuts from the Financial institution of England this 12 months. Some would say this can be a danger for the financial institution, as it would squeeze the online curiosity margin.
Though that is true, I count on the destructive influence to be outweighed by the rise in enterprise performed with new loans and mortgage merchandise. The group has a big retail, personal wealth and company division. With decrease rates of interest, demand for cheaper private and enterprise loans ought to improve considerably. This could present the group with increased income, supporting future dividend funds.
Jon Smith doesn’t personal shares in NatWest Group.
Pets at Residence
What it does: Pets at Residence sells pet merchandise on-line and thru a UK chain of pet superstores, a lot of which additionally provide vet and pet care companies.
By Roland Head. A 2023 survey by UK Pet Meals discovered that 57% of UK households had a pet, up from 40% in 2019.
All these further pets want feeding and caring for. I consider Pets at Residence (LSE: PETS) presents a powerful alternative for UK inventory market traders to revenue from this development in demand.
Annual gross sales have risen by 50% to £1.5bn since 2019, whereas working revenue has greater than doubled to £119m, for the 12 months ended 31 March 2024.
I feel the corporate’s built-in provide will assist it to win additional market share.
One danger is that an ongoing competitors investigation into vet teams might damage Pets’ pricing energy. Nevertheless, I reckon that is largely priced in.
Pets at Residence’s share value has fallen 40% from its 2021 peak of 500p.
The shares now commerce on 13 instances forecast earnings, with a 4.6% dividend yield. I see this as a good shopping for alternative.
Roland Head has no place in Pets at Residence.
Major Well being Properties
What it does: Major Well being Properties leases GP surgical procedures within the UK and Eire, primarily to authorities organisations.
By Stephen Wright. Rates of interest have began to return down within the UK. And I feel actual property funding belief (REIT) Major Well being Properties (LSE:PHP) stands to learn in fairly a giant method.
With the overwhelming majority of its lease coming from nationwide governments, the chance of defaults is minimal. And demand for its buildings ought to be sturdy as life expectations improve over time.
These options give Major Well being Properties good earnings visibility into the longer term. And the corporate has used this to take a big quantity of debt onto its steadiness sheet.
That’s the largest danger with the enterprise in the intervening time. If the agency has to refinance its debt at increased charges, the dividend might come beneath strain.
Decrease rates of interest lower the prospect of this occurring, although. And with the share value already beginning to rally from its lows, I’m seeking to purchase the inventory whereas there’s nonetheless a 6% dividend on provide.
Stephen Wright owns shares in Major Well being Properties.
