In this article, we shared our list of the best FTSE dividend stocks.
The first half of 2024 has been notable for the UK equity market, as the FTSE 100, the benchmark index for UK company shares, hit a record high. However, stocks tumbled in the first week of June as financial shares mirrored broader losses in European markets. That was mainly due to the political uncertainty that unsettled investors and a slump in industrial mining stocks further dragged down the market. That said, with some time remaining in the general elections, there is still some potential for additional developments and surprises within the UK market. The index is up by nearly 6% this year so far, compared with a 14.3% return of the broader US market
The Bank of England (BoE) was one of the first central banks to begin increasing interest rates after the peak of the COVID pandemic. From December 2021 to August 2023, it raised the bank rate by 515 basis points to a 16-year high of 5.25% in order to address rising inflationary pressures in the economy. According to a Reuters poll of economists, the BoE is expected to begin cutting interest rates in August. Most economists also anticipate at least one more rate reduction this year, despite ongoing high inflation in wages and services. Yael Selfin, chief UK economist at KPMG, made the following comment on the situation:
“While we are seeing some tentative signs of cooling in the labor market, service sector inflation remains persistently high and it is likely the MPC would want to wait until the next set of forecasts and a few more data points before it embarks on its first rate cut.”
Overall, UK inflation is expected to remain slightly above the BoE’s target of 2.0% in every quarter until at least the end of 2025, according to the poll. Median forecasts indicated that inflation would average 2.5% this year and 2.2% next year.
After reaching new highs in 2024, the FTSE 100 may attract more investors, particularly those focused on income accumulation. The projected dividend yield of 3.8% for 2024 and 4.1% for 2025 is appealing, especially since these yields surpass the current inflation rate. Analysts predict that the ten largest dividend-paying companies in the UK will return £43.9 billion to shareholders, accounting for 55% of the total dividends from the FTSE 100. The top 20 companies are expected to contribute £57.4 billion, making up 72% of the total dividends.
In 2023, UK dividend growth of 5.4% aligned with the global average, according to a report by Janus Henderson. This increase was driven by substantial dividend increases from banks and oil producers, although it was tempered by lower payouts from mining companies. The report further mentioned that annual dividends in the UK grew to $86 billion in 2023 from over $63 billion in 2020.
While investors gravitate toward American dividend stocks, some of the best FTSE dividend stocks also offer similar investment opportunities.
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Our Methodology:
For this article, we scanned through the list of FTSE stocks and picked dividend stocks from the list. From the resultant dataset, we picked the 10 best FTSE dividend stocks with the highest number of hedge fund investors tracked by Insider Monkey as of Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Smith & Nephew plc (NYSE:SNN)
Number of Hedge Fund Holders: 8
Smith & Nephew plc (NYSE:SNN) is a London-based manufacturing company that specializes in medical equipment. In April, JPMorgan released a list of the best European stocks and added SNN to that list because of the stock’s impressive dividend yield. The company has paid regular dividends to shareholders every year since 1937, which makes SNN one of the best FTSE dividend stocks on our list. It currently offers a semi-annual dividend of $0.462 per share and has a dividend yield of 3%.
Over the past five years, Smith & Nephew plc (NYSE:SNN)’s stock declined by 40%, as its bottom line declined despite the growth in revenue. Despite the declines in net income, Smith & Nephew continued to pay out dividends rather than reinvesting into its business. The company’s 5-year average payout ratio is nearly 90%, with the last several years’ figures exceeding 100%, which implies that the company is taking funds from elsewhere to pay shareholders. Clearly this strategy is not working, as evidenced by the drop in the stock price.
However, the drop in the stock price might present an investing opportunity provided that the company returns to growth. The stock’s trailing twelve-month P/E ratio is 43, which is high, but might be fair for a growth company. In fiscal year 2023, Smith & Nephew plc (NYSE:SNN) achieved revenue growth that exceeded its full-year guidance and significantly improved its trading profit margin despite a challenging macroeconomic environment. The company’s revenue for the year came in at over $5.5 billion, up from $5.2 billion in 2022. Its trading profit also jumped by 7.6% on a year-over-year basis to $970 million. In addition, the company’s ongoing investment in innovation continues to yield results, with nearly half of its 2023 growth stemming from products introduced in the past five years. During the year, the company returned $327 million to shareholders through dividends.
Smith & Nephew plc (NYSE:SNN) has several strengths, including a significant presence in the profitable US market, well-known brands, and appealing products like hip and knee implants. These implants are made using advanced load-bearing technology through a unique manufacturing process. Considering the company’s strong recent performance, investors probably believe that this high P/E is justified. Moreover, they expect the company to continue outperforming in a challenging market environment. Smith & Nephew plc (NYSE:SNN) has given a strong outlook for fiscal 2024. The company expects underlying revenue growth within the range of 5% to 6% and its trading profit margin is expected to be at least 18%.
Oakmark Funds also expects to see growth across Smith & Nephew plc (NYSE:SNN)’s segments. This is what the firm said about the company in its first-quarter investor letter:
“Smith & Nephew plc (NYSE:SNN) is a global medical device manufacturer operating in attractive end markets. The company currently generates the majority of its earnings through its sports medicine and advanced wound management businesses, which command strong market share positions and offer favorable growth prospects. The company’s orthopedics business has historically underperformed its peers, but we are pleased by the decisive actions taken by new CEO Deepak Nath, which we expect will improve growth, margins and return on invested capital for the orthopedics segment. We believe the company is in the early stages of its margin improvement journey and an upgrade of the product portfolio in recent years will drive sustainably higher revenue growth than in the past. We were able to purchase Smith & Nephew shares at a discount to our estimate of intrinsic value, despite the company’s improving fundamental outlook.”
At the end of March, eight hedge funds tracked by Insider Monkey reported having stakes in Smith & Nephew plc (NYSE:SNN), down from 11 in the previous quarter. These stakes have a total value of nearly $35 million.
9. Pearson plc (NYSE:PSO)
Number of Hedge Fund Holders: 11
Pearson plc (NYSE:PSO) is a British multinational publishing and education company that mainly provides related products and services. The stock is up by over 80% since March 2020 as the publisher has adapted well to the evolving landscape of online education. The company capitalized on the pandemic, generating significant earnings from its virtual schooling services. It reported a 43% enrollment growth in its virtual schools during the academic year of 2020-2021. However, in fiscal 2023, the company reported a 20% decline in its Virtual Learning sales driven by lower enrolments.
That said, Pearson plc (NYSE:PSO) saw growth on various other fronts last year. The company’s adjusted operating profit came in at £573 million ($724.5 million), up from £456 million ($576.54 million) in 2022. Its dividend is also on a safe foundation as the company reported strong cash generation. Its operating cash flow for the year was £587 million ($742.16 million) and its free cash flow was £387 million ($489.30 million), both showing year-over-year growth from £401 million ($507 million) and £222 million ($280.68 million), respectively. The company distributed £155 million ($195.97 million) to shareholders through dividends, which makes PSO one of the best FTSE dividend stocks on our list. Moreover, it expects to improve its free cash flow this year due to reduced restructuring costs.
Pearson plc (NYSE:PSO) currently offers a semi-annual dividend of $0.199 per share for a dividend yield of 2.38%, as of June 11.
Pearson plc (NYSE:PSO) has a forward P/E ratio of 14.68, which appears a little low considering growth forecasts in its earnings over the next two years. The company’s net debt currently stands at £700 million ($885.03 million), which shouldn’t concern investors given its outlook. In addition, its return on capital increased to 10.3% in 2023, from 8.7% last year, which suggests an improvement in the company’s efficiency in generating profits from its invested capital.
As of the end of March, 11 hedge funds tracked by Insider Monkey own stakes in Pearson plc (NYSE:PSO), up from 10 in the previous quarter. The overall value of these stakes is over $20.5 million.
8. HSBC Holdings plc (NYSE:HSBC)
Number of Hedge Fund Holders: 17
HSBC Holdings plc (NYSE:HSBC) ranks eighth on our list of the best FTSE dividend stocks. The financial services company currently offers an interim dividend of $1.55 per ADS, which also includes a special dividend of $1.05 per ADR. This special dividend came from the profits gained by selling its Canadian banking operations to Royal Bank of Canada. The sale was concluded on March 28, 2024. Since then, the share price has surged by over 10%. As of June 11, HSBC supports a dividend yield of 7.04%.
HSBC Holdings plc (NYSE:HSBC) benefits a lot from its strong position in Asia. Recently, HSBC (China) finished acquiring Citi’s retail wealth management business in mainland China. This includes investment assets, deposits, and the customers associated with wealth management across 11 key cities in mainland China. In 2023, the bank saw significant growth in mainland China, with a 53% increase in invested assets and a 30% rise in its wealth client base compared to the previous year. In the first quarter of 2024, HSBC Holdings plc (NYSE:HSBC) in China nearly doubled its Net New Invested Assets (NNIA) compared to the same period last year, contributing to a 33% growth in Asia’s NNIA to $19 billion. These acquisitions tell us that the company is directing its attention toward a region where it generates approximately half of its revenue. However, due to geopolitical tensions and the GDP growth slowdown impacting the area, we believe that HSBC’s stock is trading at a discount. The stock has a forward P/E of 7.36.
In the first quarter of 2024, HSBC Holdings plc (NYSE:HSBC) reported revenue of $20.8 billion, up 3% from the same period last year. However, the company’s net interest income declined by $0.3 billion to $8.7 billion. Its strong profit performance, reaching $12.7 billion in the first quarter, has allowed the company to maintain its practice of rewarding shareholders. During the quarter, the company returned $8.8 billion to shareholders through dividends and share repurchases.
According to Insider Monkey’s database, 17 hedge funds owned stakes in HSBC Holdings plc (NYSE:HSBC) at the end of March, growing from 15 in the previous quarter. The consolidated value of these stakes is nearly $70.7 million.
7. British American Tobacco p.l.c. (NYSE:BTI)
Number of Hedge Fund Holders: 19
British American Tobacco p.l.c. (NYSE:BTI) is a British multinational manufacturing company that specializes in tobacco, cigarettes, and other nicotine products. Investing in tobacco stocks has always benefitted income investors as these companies typically enjoy substantial profit margins, possess resilient business models, and demand minimal capital expenditures. In addition, these companies don’t have to bear excess research and development expenses, which allows them to distribute a significant portion of their earnings to investors.
British American Tobacco p.l.c. (NYSE:BTI) is mainly recognized for its iconic cigarette brands, which were acquired during its merger with RJ Reynolds in 2017. Recently, the company recorded a $31 billion write-down on the worth of its US cigarette business, indicating a probable overvaluation of the acquisition. This reflects its focus on shifting towards smoke-free products. Introducing ‘reduced risk products’ could be a winning ticket for the company given declining smoking rates in the country and strict regulations. In FY23, the company reported a 1.3% year-over-year decline in revenue at £27.28 billion ($34.49 billion).
British American Tobacco p.l.c. (NYSE:BTI)’s dividend is solid, mainly driven by its stable cash generation. In 2023, the company’s operating cash flow came in at £10.7 billion ($13.53 billion) and its free cash flow before dividend payments was over £8.3 billion ($10.49 billion). It also returned over £5 billion ($6.32 billion) to shareholders through dividends. In addition, the company’s dividend outlook appears promising as it expects to generate over £40 billion ($50.57 billion) in free cash flow before dividends over the next five years. It currently offers a quarterly dividend of $0.7431 per share, which gives its stock a yield of around 12%.
British American Tobacco p.l.c. (NYSE:BTI) has a forward P/E of 7.07, while its competitor Philip Morris International has a significantly higher forward P/E of 16.72. In addition to being more attractively valued, BTI also has a dividend yield twice as high as Philip Moris’, which makes it a good dividend option for income investors.
According to Insider Monkey’s database, there are 19 hedge funds bullish on British American Tobacco p.l.c. (NYSE:BTI) as of the end of March, down from 22 in the preceding quarter. The collective value of these stakes is over $588 million. With over 12.6 million shares, Orbis Investment Management was the company’s leading stakeholder in the first quarter.
6. Unilever PLC (NYSE:UL)
Number of Hedge Fund Holders: 20
Unilever PLC (NYSE:UL) is a multinational consumer goods company that offers a wide range of related products. Stocks from the consumer staples industry are well-regarded for providing stability to investors’ portfolios, particularly for those aiming to generate income. Moreover, despite the ongoing AI wave, the companies in the consumer staples industry have shown stable results over the past quarters.
In the first quarter of 2024, Unilever PLC (NYSE:UL) posted a 4.4% year-over-year underlying sales growth and its volume growth also grew to 2.2%. In comparison, Procter & Gamble Co (NYSE:PG)’s sales volume remained flat during the first quarter. For 2024, Unilever expects its underlying sales growth to be within its multi-year range of 3% to 5%. The company’s financials have remained strong over the years. In 2023, its underlying operating profit came in at €9.9 billion ($10.59 billion), up 2.6% from the same period last year. This growth shows that the company has generated more earnings from its core operations, which eventually contributed to its shareholder return. In fiscal 2023, the company returned €5.9 billion ($6.31 billion) to shareholders through dividends and share repurchases.
Unilever PLC (NYSE:UL), which ranks sixths among the best FTSE dividend stocks, currently offers a quarterly dividend of $0.455 per share and its stock sports a yield of 3.27%.
Unilever PLC’s (NYSE:UL) strong financial position has prompted the company to implement proactive steps to improve its business. The divestment of its ice cream business is also expected to improve its balance sheet through a spin-off, which the board has determined is the most suitable choice at the moment. The transaction is to be finalized at the end of 2025.
At the end of March, 20 hedge funds in Insider Monkey’s database owned stakes in Unilever PLC (NYSE:UL), down by five over the quarter. The consolidated value of these stakes is over $952 million. Fisher Asset Management remained bullish on the stock, growing its position in the company by 33% in in the first three months of the year to 14.31 million shares.
5. Prudential Financial, Inc. (NYSE:PRU)
Number of Hedge Fund Holders: 33
Prudential Financial, Inc. (NYSE:PRU) is a multinational insurance company that provides services in life and health insurance and asset management. Last month, Jefferies upgraded the stock to Buy, highlighting the company’s annuity leverage. The firm believes that the company’s involvement with Prismic, a life and annuity reinsurer it helped establish, could boost the stock. Since the start of 2024, the stock is up by nearly 11% and its 12-month return stands at over 37%.
Prudential Financial, Inc. (NYSE:PRU)’s recent quarterly earnings fell short of expectations, however, the company’s global investment management business, PGIM, performed strongly. Market gains and $26.6 billion in net inflows led to a 6% year-over-year in assets under management, surpassing $1.3 trillion. This growth boosted asset management fees and related revenue, despite higher expenses. As a result, for the first quarter, PGIM’s pre-tax adjusted operating income rose by nearly 12% on the year to $169 million. In addition, the company maintained its focus on becoming a faster-growing, more capital-efficient, and agile company by expanding its market-leading business.
Prudential Financial, Inc. (NYSE:PRU) is one of the best FTSE dividend stocks on our list due to its steadfast dedication to shareholder returns. In the first three months of the year, the company returned $726 million to shareholders, including $476 million in dividends. Moreover, it has been raising its payouts consistently for the past 16 years. The company’s quarterly dividend currently comes in at $1.30 per share for a dividend yield of 4.5%.
Prudential Financial, Inc. (NYSE:PRU) is adept at strategically diversifying its investment portfolio. This was seen when the company expanded into alternative assets, acquiring Deerpath Capital last year. In its recent earnings call, the CEO also mentioned that the company is diversifying its product range in Japan. Moreover, Prudential’s recent announcement about selling its business in Argentina indicates a shift toward focusing on fewer high-growth emerging markets. Through this, the company would be able to concentrate on scaling its business more effectively compared to the broader approach. Prudential Financial, Inc. (NYSE:PRU) has a forward P/E of 8.69, which shows that the stock is relatively cheap given its strong earnings, high yield, and solid operating performance. We have also seen an increase in insider buying activity for the stock.
As per Insider Monkey’s database, 33 hedge funds owned stakes in Prudential Financial, Inc. (NYSE:PRU) at the end of March, up from 32 in the previous quarter. These funds own around $543 million worth of stock.
4. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 40
BP p.l.c. (NYSE:BP) ranks fourth on our list of the best FTSE dividend stocks. The British multinational oil industry company reported growth in its net debt to $24 billion in the first quarter of 2024, from $21.2 billion in the prior-year period. Its debt-to-capitalization also grew to 22% from 19.6%. Due to this, S&P Global downgraded the stock’s credit outlook to stable from positive. The company’s CEO has devised a solution to address its debt by proposing to allocate 80% of excess cash toward dividends and share buybacks. Moreover, the company has announced $1.75 billion in share buybacks. Though this could be good news for income investors, S&P stated that this approach is unlikely to reduce debt, contrary to their previous expectations, despite the current favorable market conditions. The company is trying to improve its cash position as it generated over $5 billion in operating cash flow during the quarter.
That said, Citigroup stated that BP p.l.c. (NYSE:BP) is surpassing most of its oil peers in the oil and gas industry. They believe that the company is perceived as a potential leader in Europe’s new energy landscape, particularly after right-wing parties demonstrated significant influence in the recent European Union elections. Citi added that they see the emergence of a profitable and scalable transition business within the company, which could establish the benchmark for the integration of a modern European energy company into progressive equity portfolios.
BP p.l.c. (NYSE:BP)’s adoption of modern technology is evident in its electric vehicle charging division, which is actively seeking to acquire Tesla’s supercharging stations across the US. In addition to the infrastructure, BP has committed $1 billion to expand its EV charging network, including hiring the personnel associated with these sites.
BP p.l.c. (NYSE:BP) has a forward P/E of 7.43, which appears low, considering analysts’ projections of a 10% annual growth in the company’s EPS until the end of 2026. It is one of the best FTSE dividend stocks on our list as the company has been regularly paying dividends to shareholders since 1998. It currently pays an interim dividend of $0.4362 per ADS and its stock has a dividend yield of 4.88%.
BP p.l.c. (NYSE:BP) was a part of 40 hedge fund portfolios, which held in aggregate $2 billion worth of shares at the end of March.
3. GSK plc (NYSE:GSK)
Number of Hedge Fund Holders: 41
GSK plc (NYSE:GSK) is a leading global healthcare company that operates across various therapeutic areas, including vaccines, respiratory, and oncology. The company currently offers a quarterly dividend of $0.376 per share for a dividend yield of 3.67%. This stock is up by nearly 10% year-to-date, although it experienced volatility in the first week of June when shares dropped by over 9%. This decline occurred after a Delaware judge permitted over 70,000 lawsuits claiming that its discontinued heartburn medication Zantac led to cancer, posing a setback for the British pharmaceutical company. This ongoing uncertainty adds to a challenging decade for GSK, as the company continues to struggle with the need to replenish its pharmaceutical pipeline. However, with nearly 90 products currently in its R&D pipeline, it appears that the company is making significant progress.
From a dividend perspective, GSK plc (NYSE:GSK) can be a solid investment. Though the company’s dividend has encountered some challenges in the past, its cash position indicates that the company has enough resources on its balance sheet to sustain its payouts. In Q1 2024, the company generated over £1 billion ($1.26 billion) in operating cash flow and its free cash flow came in at £300 million ($379.47 million). During the quarter, it returned £568 million ($718.46 million) to shareholders through dividends, which places it on our list of the best FTSE dividend stocks.
GSK plc (NYSE:GSK) has a forward P/E of 10.21, lower than AstraZeneca’s forward P/E ratio of 18.94. Considering analysts’ estimates of an 8% revenue growth this year, GSK seems to be trading at a good value for a high-quality company.
The number of hedge funds tracked by Insider Monkey owning stakes in GSK plc (NYSE:GSK) grew to 41 from 40 during the first three months of 2024. These funds held in aggregate $2 billion worth of GSK shares at the end of March.
2. AstraZeneca PLC (NASDAQ:AZN)
Number of Hedge Fund Holders: 46
AstraZeneca PLC (NASDAQ:AZN) is a multinational pharmaceutical and biotech company, based in Cambridge, UK. Pharmaceutical companies are in a race to boost their annual revenue targets by 2030 significantly. AstraZeneca’s rival, Pfizer, expects to grow its annual revenue by $45 billion by 2023. Given its 2023 annual revenue of $58.5 billion, this growth would push the company’s total revenue to over $103 billion. This means that Pfizer is aiming to return to its peak performance of 2022 when its annual revenue surpassed $100 billion due to the high demand for coronavirus vaccines. On the other hand, AstraZeneca PLC (NASDAQ:AZN) expects to generate $80 billion in annual revenues by 2030, in addition to launching 20 new medicines during this timeframe. The company is gaining confidence to do so from the strong performance of its oncology segment, which showed a 26% year-over-year growth in the first quarter of 2024. While the numbers appear hopeful, the outcomes of scientific research are inherently uncertain. Furthermore, revenue forecasts can be influenced by competitive pressures and pricing dynamics. Though analysts commend AstraZeneca PLC’s (NASDAQ:AZN) enthusiasm and acknowledge that the company has met its set targets before, they believe it’s important to carefully consider industry dynamics before making ambitious claims.
That said, AstraZeneca PLC’s (NASDAQ:AZN) investments in research and development (R&D) may play a crucial role in reaching this objective. In fact, R&D accounted for 23% of the company’s revenue in 2023, up from 22% in the previous year. In addition to this, the company does not face severe challenges from its debt position, as its total debt is much less than that of Pfizer and it will have several more prominent medicines available on the market by 2030. With a forward P/E multiple of 18x, AZN appears attractively priced due to its recent earnings and forecasts.
AstraZeneca PLC (NASDAQ:AZN) currently pays an annual dividend of $3.10 per share, having raised it by 7% in April this year. With a dividend yield of 3.04%, AZN is one of the best FTSE dividend stocks on our list.
At the end of March, 46 hedge funds tracked by Insider Monkey held stakes in AstraZeneca PLC (NASDAQ:AZN), down from 48 in the previous quarter. The collective value of these stakes is over $2.1 billion.
1. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 50
Shell plc (NYSE:SHEL) tops our list of the best FTSE dividend stocks. The London-based oil and gas company currently offers a quarterly dividend of $0.688 per ADS and its stock has dividend yield of 3.90%. In February, the company raised its payout seventh time after slashing its dividend in 2020 in the face of the pandemic, which plummeted oil prices. Moreover, it has paid regular dividends to shareholders since 1985.
For the first quarter, Shell plc (NYSE:SHEL) reported a nearly 17% year-over-year decline in revenue at $72.5 billion. However, its cash position remains strong, offering reassurance to investors. The company’s operating cash flow for the quarter came in at $13.3 billion and it returned $5 billion to shareholders through dividends and share repurchases. Moreover, it completed $3.5 billion of share buybacks that were announced in the fourth quarter of 2023.
Despite fluctuations in oil prices. Shell plc (NYSE:SHEL)’s production remained intact. In the first quarter, its total oil and gas production rose by 10% compared to the previous quarter, driven by reduced maintenance at Prelude and Pearl GTL facilities. LNG liquefaction volumes also increased by 7%, largely due to decreased maintenance at Prelude.
Shell plc (NYSE:SHEL) is dedicated to achieving a 100% reduction in carbon emissions by 2050. Until 2030, it plans to maintain oil production at 1.4 million barrels per day. Moreover, the company aims to expand its liquefied natural gas business, expecting a demand increase of over 50% by 2040. The company’s balanced strategy appears somewhat successful, as seen in its latest quarterly adjusted earnings of $7.7 billion, exceeding both analysts’ forecasts and the previous quarter’s earnings of $7.3 billion.
The number of hedge funds tracked by Insider Monkey holding stakes in Shell plc (NYSE:SHEL) grew to 50 in at the end of March, from 46 a quarter earlier. The total value of these stakes is more than $5.5 billion.
While we acknowledge the potential of energy companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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