What are 5 of the top dividend stocks on the FTSE 100 to invest in for 2023? The UK large cap index has some of the best companies for dividend investing in the world.
With the index weighing heavily towards industries typically classed in the “value” sectors, many companies preferred form of shareholder capital return is in the form of dividends, and with some companies steadily yielding upwards of 7% annually, and others with excellent track records for dividend growth, there are some excellent choices to invest in here.
Each stock in this article comes from a different industry, giving you a varied choice of stocks to choose from to help you build a diversified portfolio.
Now I must caveat this by saying that this is not financial advice, and purely my own thoughts. I would always advise doing your own due diligence before investing. So, without further ado, let’s get into it.
Unilever
First on the list is Unilever, ticker symbol ULVR. Unilever is a UK-based consumer goods company. The company operates through three segments: Beauty & Personal Care, Foods & Refreshment, and Home Care. As of writing this article, the stock is currently trading at £41 pounds and 10 pence per share.
You may not be familiar with the individual products that Unilever owns from the name of the group company, but household names like Dove, Persil, Lipton, Hellmann’s, and PG Tips just to name a few are all owned by Unilever.
The company has a diversified range of products that we use on a day-to-day basis across the world. While it’s UK based, Unilever gets a sizeable part of its revenue overseas, further diversifying its income and providing an excellent way for us as investors to hedge against foreign currency volatility.
As a consumer staples company, Unilever is also recession proof. If there is to be a global recession in the future, with Europe already arguably in one, consumers are unlikely to stop buying Unilever products.
At the end of the day, we all still need soap, house cleaning products and tea! Compared to a discretionary purchase like designer clothes, Unilever’s income is highly dependable.
The stock currently yields a strong dividend of 3.55%, outpacing the FTSE100 average yield. The stock is also close to its 52-week high of £42 pounds and 50 pence, indicating strong technical momentum as well.
Unilever also recently benefitted from theinclusion of an activist investor to the board of directors, Nelson Peltz. Since this inclusion, a new CEO has been announced to take the reins in July of 2023.
There is an expectation that this will deliver greater returns to shareholders than the current outgoing CEO has managed to deliver. Unilever pays out dividends quarterly, typically in March, June, September, and December.
Shell
Number 2 on our list is Shell, ticker symbol SHEL. As of writing this article, the stock is currently trading at £24 pounds and 67 pence per share.
The oil majors had an immense year in 2022, and Shell was no exception. Shell saw their recent earnings revenues leap 46% to $381 billion dollar. They have come under political scrutiny, with many lobbying for a windfall tax on their profits because of soaring commodity prices.
Shell have decided to return more capital to shareholders with this excess cash, increasing their quarterly dividend by 15% from the previous quarter, while also announcing a further $4 billion dollar share buyback authorisation.
The stock now currently yields 3.5% and looks set to grow dividends further in the future. The stock has also had an immense run since the 2020 lows, soaring over 300%.
Like Unilever, Shell also pays out its dividend quarterly, typically in March, June, September, and December, providing a steady stream of income over time.
While receiving dividends in a standard investment account is a wonderful way to boost your personal income streams, investing in a tax-sheltered ISA helps maximise how much of your earnings you keep.
With the end of the fiscal year looming, it’s important to maximise your ISA contribution before it resets, and Interactive Brokers, a partner of Wise Wealthhas recently launched a Stocks and Shares ISA product.
If you want to know more about Interactive Brokers or to set up an ISA with them, click the link above for more details. Make sure to maximise your ISA contributions to build a tax-sheltered portfolio and not have to pay tax on your dividend income as a UK resident!
GlaxoSmithKline
Number 3 on our list of top dividend stocks on the FTSE100 is GlaxoSmithKline, ticker symbol GSK.
GSK is a global bio pharma company that manufactures vaccines and speciality medicines to prevent and treat disease. As of writing this article, the stock is currently trading at £15 pounds and 5 pence per share.
As a stalwart of the healthcare industry, GSK is another recession-proof, defensive stock that provides a solid return in the form of a dividend. With a current yield of 4.08% it is also a higher return than other pharmaceutical stocks on the FTSE 100.
The stock price has been challenged over the past year after falling following the spinoff of Haleon, its consumer health division, with investors calling into question the earnings resiliency of GSK.
Despite this, the recent 2022 results showed strong revenue growth of 11%, as well as a 14% increase in operating profit. GSK pays out dividends quarterly, typically in January, April, July, and October.
Legal & General
Number 4 on the list is Legal & General, ticker symbol LGEN. Legal & General is a UK-based financial services provider, with the company segments including retirement, investment management and insurance. As of writing this article, the stock is currently trading at 256 pence per share.
Legal & General is a mainstay of my top dividend stocks year after year. This is partly due to the immense dividend yield of 7.21% that has proven stable over many years.
One of my reasons for investing in Legal & General was the strength of the management team. Lately, chief executive Nigel Wilson announced his retirement from the firm, which does pose a risk for investors.
The stock price has remained flat over a 5-year period after taking a severe hit in 2020, however it was one of the few stocks in the financial services industry to maintain its dividend and not succumb to a cut or suspension. Legal & General pays out dividends bi-annually, typically in March and September.
Rio Tinto
Finally at number 5 on our list is Rio Tinto, ticker symbol RIO. Rio Tinto is a mining and metals company and is principally engaged in the production of materials such as iron ore, aluminium, copper, and minerals. As of this video, the stock is currently trading at £60 pounds and 71 pence per share.
Given the previous 2 dividend payments, Rio Tinto is the highest dividend yield on this list of 8.7%. The 2021 final dividend also included a special dividend pay-out, which rewarded investors with an astronomical 13% yield at the time of payment. Since then, the stock has appreciated significantly due to the rise in commodity prices and inflationary macro environment.
With the reopening of China expected to keep commodity prices elevated, Rio Tinto could be an excellent pick for a dividend portfolio for exposure to the materials sector. If commodity prices tumble due to a deep recession, the sustainability of the dividend could however come into question. Rio Tinto pays out dividends bi-annually, typically in March and September.
So, there you have it. 5 of the top dividend stocks to invest in for 2023. Are you invested in any of these already? Are there any others that aren’t on this list that you think deserve a mention? Let me know in the comments below.
