In this article, we discuss 10 UK dividend stocks to buy. You can see some more stocks from this list by clicking 5 UK Dividend Stocks To Buy.
In the fourth quarter of 2021, real GDP of the UK rose by 1.0% on a quarter-over-quarter basis. The UK economy grew by 7.5% in 2021, the largest gain recorded since World War II. This came after the GDP contracted by 9.4% in 2020, as the United Kingdom was hit particularly hard by the COVID-19 pandemic and ensuing public restrictions.
UK Economic Outlook 2022
According to the British Chambers of Commerce, the economic growth for the UK in 2022 is forecasted to be 3.6%, compared to 4.2% in the earlier forecast in December 2021. This figure is less than half the 7.5% GDP growth recorded in 2021. The lower economic outlook for 2022 is a result of reduced consumer spending and substandard business investment.
Previously, consumer spending was forecasted to be 6.9% in 2022, but the guidance has been lowered to 4.4%. Inflation is expected to exceed wage growth until the second quarter of 2024, which will tighten household budgets and put a strain on consumer spending. The Russian invasion of Ukraine is projected to propel CPI inflation to a record high of 8% in the second quarter of 2022. Similarly, investment inflows in the UK are forecasted to grow at 3.5% in 2022, compared to the earlier expectation of 5.1% and significantly below the Bank of England’s latest projection of 13.75%.
Amid the uncertain stock market outlook in the United Kingdom and worldwide, it is important to hold stocks that offer solid dividends as a hedge against inflation. Investors usually flock to dividend payers like Microsoft Corporation (NASDAQ:MSFT), The Coca-Cola Company (NYSE:KO), and Altria Group, Inc. (NYSE:MO), but in this article, we focus on notable UK dividend stocks.
Our Methodology
We selected UK stocks with positive analyst ratings, strong dividend histories, and solid business fundamentals. Data from 900+ elite hedge funds tracked by Insider Monkey at the end of December 2021 was used to identify the number of hedge funds that hold stakes in each firm.
UK Dividend Stocks To Buy
10. Pearson plc (NYSE:PSO)
Dividend Yield as of March 29: 2.63%
Number of Hedge Fund Holders: 8
Pearson plc (NYSE:PSO) was founded in 1844 and is based in London. Pearson plc (NYSE:PSO) operates as a multinational publishing and education company. It conducts business via five segments – Assessment & Qualifications, Virtual Learning, English Language Learning, Higher Education, and Workforce Skills.
On March 23, Pearson plc (NYSE:PSO) declared a $0.189 per share semi-annual dividend, a 119.8% increase from its prior dividend of $0.086. The dividend will be distributed on May 11, to shareholders of record on March 25. The stock delivers a dividend yield of 2.63% as of March 29.
Pearson plc (NYSE:PSO) announced on February 25 that FY 2021 revenue came in at £3.42 billion, up 0.9% year-over-year, reflecting underlying sales growth of 8%. The non-GAAP EPS of £0.349 also increased as compared to the prior-year EPS of £0.287. The shares rose 11% after the results went live.
Societe Generale analyst Simon Baker on March 14 upgraded Pearson plc (NYSE:PSO) to Buy from Hold with a price target of £875. Pearson plc (NYSE:PSO) confirmed that it had received and rejected bid interest from a US private equity firm, the analyst told investors in a research note. The analyst stated that the private equity’s interest in Pearson plc (NYSE:PSO) lends more focus to the company’s medium term outlook.
Among the hedge funds tracked by Insider Monkey, Kenneth Squire’s 13D Management is the leading shareholder of Pearson plc (NYSE:PSO) as of Q4 2021, with 827,474 shares worth approximately $7 million. Overall, 8 hedge funds were bullish on the stock at the end of December.
In addition to Microsoft Corporation (NASDAQ:MSFT), The Coca-Cola Company (NYSE:KO), and Altria Group, Inc. (NYSE:MO), Pearson plc (NYSE:PSO) is a notable dividend stock to consider.
9. Smith & Nephew plc (NYSE:SNN)
Dividend Yield as of March 29: 3.12%
Number of Hedge Fund Holders: 13
Headquartered in Watford, the United Kingdom, Smith & Nephew plc (NYSE:SNN) designs and manufactures medical devices. The company provides regenerative medicine products, knee implants, hip implants, and devices for stabilizing trauma injuries, fractures, and deformity correction procedures.
On February 22, Smith & Nephew plc (NYSE:SNN) announced a final dividend of 23.1¢ per share. Together with the interim dividend, the total FY2021 distribution equals 37.5¢ per share. The dividend will be paid on May 11, to shareholders of record on April 1. The stock yields 3.12% as of March 29.
The company reported its FY2021 financial results and guidance for 2022 on February 22. The FY adjusted EPS came in at $0.809, up 25% on a year-over-year basis. For 2022, the company is aiming for revenue growth between 4.0% to 5.0%, and the consensus revenue estimate for the year is $5.52 billion. Smith & Nephew plc (NYSE:SNN) expects higher growth in the second half of 2022.
RBC Capital analyst Jack Reynolds-Clark on March 15 initiated coverage of Smith & Nephew plc (NYSE:SNN) with an Outperform rating and a £1,700 price target. According to the analyst, the market is not accounting for the potential acceleration of revenue growth and margins from Smith & Nephew plc (NYSE:SNN)’s “strong positioning in high-growth” sports medicine, ambulatory surgical centers, and its “differentiated” surgical robot. The analyst sees Smith & Nephew plc (NYSE:SNN) building a name for itself as a “major medtech company at a historically low entry point.”
According to the fourth quarter database of Insider Monkey, 13 hedge funds were bullish on Smith & Nephew plc (NYSE:SNN), with combined stakes amounting to roughly $111 million. Israel Englander’s Millennium Management is the largest shareholder of the company, owning more than 1 million shares worth $36.4 million.
8. Luxfer Holdings PLC (NYSE:LXFR)
Dividend Yield as of March 29: 2.97%
Number of Hedge Fund Holders: 14
Luxfer Holdings PLC (NYSE:LXFR) is a Manchester-based company that designs and manufactures high-performance materials and components for defense, healthcare, transportation, and industrial applications. Luxfer Holdings PLC (NYSE:LXFR)’s dividend yield on March 29 stood at 2.97%.
On March 10, Luxfer Holdings PLC (NYSE:LXFR) declared a $0.13 per share quarterly dividend, a 4% increase from its prior dividend of $0.125. The dividend will be paid on May 4, to shareholders of record on April 14.
The company reported a Q4 non-GAAP EPS of $0.28 on February 22. The revenue of $98.7 million also increased 20.2% from the prior-year quarter. Luxfer Holdings PLC (NYSE:LXFR) announced 2022 adjusted EPS guidance of $1.30 to $1.50, compared to market consensus of $1.40. Its long-term goal for EPS is $2.00 or more.
Riley analyst Sarkis Sherbetchyan on February 23 raised the price target on Luxfer Holdings PLC (NYSE:LXFR) to $27 from $26.50 and maintained a Buy rating on the shares after the “solid” Q4 beat. The analyst believes that Luxfer Holdings PLC (NYSE:LXFR)’s differentiated portfolio should drive “strong long-term sales growth.”
According to the fourth quarter database of Insider Monkey, 14 hedge funds were long Luxfer Holdings PLC (NYSE:LXFR), compared to 13 funds in the prior quarter. Paradice Investment Management is the largest shareholder of the company, with 2.2 million shares worth over $43 million.
7. Global Ship Lease, Inc. (NYSE:GSL)
Dividend Yield as of March 29: 3.47%
Number of Hedge Fund Holders: 17
Global Ship Lease, Inc. (NYSE:GSL) is a London-based company that owns containerships which are leased out to shipping companies. On March 7, Global Ship Lease, Inc. (NYSE:GSL) announced that $28.5 million aggregate principal amount of 8.00% senior notes due 2024 will be redeemed at a price equal to 102.00% of the principal amount. The redemption date will be April 5 and approximately $89.02 million of the notes will remain outstanding after the redemption is concluded.
On February 10, Global Ship Lease, Inc. (NYSE:GSL) declared a quarterly dividend of $0.25 per share, in line with previous. The dividend was paid to shareholders on March 4. The stock delivers a dividend yield of 3.47% as of March 29.
In a press release on March 2, the company announced a Q4 non-GAAP EPS of $1.84, beating consensus estimates by $0.58. Similarly, the revenue of $153.5 million increased 119.4% on a year-over-year basis, exceeding analysts’ predictions by $28.47 million.
The Q4 results prompted a Buy recommendation on the shares by B. Riley analyst Liam Burke on March 3, who also raised the price target on Global Ship Lease, Inc. (NYSE:GSL) to $38 from $33. The analyst noted that Global Ship Lease, Inc. (NYSE:GSL) fully benefited from the acquisition of additional fleet assets that lifted its vessel count to 65.
According to Insider Monkey’s Q4 data, 17 hedge funds placed long calls on Global Ship Lease, Inc. (NYSE:GSL), compared to 14 funds in the prior quarter. David Salanic’s Whitefort Capital is the biggest shareholder of the company, with 963,226 shares worth over $22 million.
Here is what Massif Capital has to say about Global Ship Lease, Inc. (NYSE:GSL) in its Q4 2021 investor letter:
“We initiated a 6% position in GSL, bringing total maritime transit exposure up to ~9% of the portfolio when combined with our 3% SBLK position. GSL is a containership owner, leasing ships to container companies (such as Maersk) at fixed rates. As owners, they own and manage the vessels (responsible for crews, maintenance, insurance) but do not have fuel costs. GSL focuses on mid-size to smaller containerships, which serve the faster-growing inter-regional trade routes that represent ~70% of global containerized trade volume.
As they own its containers, their business is both pro-cyclical (chartered tonnages used as growth platform by liner shipping companies) and counter-cyclical (with the sale and leaseback structures used by liner companies as a balance sheet management tool). GSL has a track record that includes both organic acquisitions and a strategic combination in Q4 2018 that doubled the size of the fleet.
We like GSL because they do not have as much operational leverage as a company like ZIM (which leases on both sides of the trade), and they sign 2–5-year contracts. Liners have been eager to secure that capacity for extended durations spanning multiple years, significantly longer than has been the case historically and well-aligned with GSL’s strategic preference to lock in value over time and provide forward visibility on cash flows…” (Click here to see the full text)
6. Vodafone Group Public Limited Company (NASDAQ:VOD)
Dividend Yield as of March 29: 6.12%
Number of Hedge Fund Holders: 17
Vodafone Group Public Limited Company (NASDAQ:VOD) is a telecommunication services company based in Newbury, the United Kingdom. The company provides multiple services including fixed telephony, mobile services, broadband, digital television, internet television, and IPTV.
On February 2, Vodafone Group Public Limited Company (NASDAQ:VOD) reported that Q4 revenue grew 4.3% year-over-year to €11.68 billion, while the organic revenue growth stood at 3.7%. The company reaffirmed its FY22 guidance with adjusted EBITDA ranging between €15.2 billion and €15.4 billion and adjusted free cash flow of at least €5.3 billion. It pays dividends semi-annually, with a yield of 6.12%. The last dividend of €0.045 per share was announced on November 23 and paid on February 4, 2022.
JPMorgan analyst Akhil Dattani reiterated an Overweight rating on Vodafone Group Public Limited Company (NASDAQ:VOD) shares on February 3, while raising the price target to £170 from £165.
According to the fourth quarter database of Insider Monkey, 17 hedge funds were bullish on Vodafone Group Public Limited Company (NASDAQ:VOD), compared to 18 funds in the quarter prior. Renaissance Technologies is the biggest shareholder of the company, with a position worth approximately $389 million.
Like Microsoft Corporation (NASDAQ:MSFT), The Coca-Cola Company (NYSE:KO), and Altria Group, Inc. (NYSE:MO), Vodafone Group Public Limited Company (NASDAQ:VOD) is gaining traction among hedge funds as a prominent dividend payer.
Click to continue reading and see 5 UK Dividend Stocks To Buy.
Suggested articles:
- 10 Dividend Stocks Better Than Cryptocurrencies
- 10 Blue Chip Stocks with Dividends
- 10 Fertilizer Stocks to Buy Today
Disclosure: None. 10 UK Dividend Stocks To Buy is originally published on Insider Monkey.
