Discover the Best Platforms to Buy Dividend Stocks UK

When we talk about different investment styles, one of the most classic and conservative is dividend investing, a concept we will explore in this article.

Interested in investing in dividend-paying stocks? In the upcoming sections, we'll guide you through the best platforms to buy dividend stocks UK, highlighting their key features, fees, and essential factors to consider when selecting the perfect brokerage account for your investment needs.

Best Platforms to Buy Dividend Stocks UK

What is dividend investing?

Dividend investing is a popular financial strategy that emphasises passive income generation through the periodic payment of dividends. Dividends are usually paid by publicly traded companies and serve as a return of capital to shareholders on a quarterly, semi-annual, or annual basis.

If you invest in dividend-paying securities, you can generate additional returns beyond the appreciation of the stock. In fact, investing in dividend stocks also provides some risk diversification, as dividend-paying securities tend to be less volatile than those that do not pay dividends and often have performance characteristics different from non-dividend-paying securities.

For example, if we compare the growth of companies like Coca-Cola (KO) with Tesla, the former is much more reliable and stable over time than the latter, which is much more unpredictable. And it is precisely this characteristic that many investors value, especially the more conservative ones.

The dividend investment strategy provides value in two main ways:

  • Use dividend payments for personal uses/expenses
  • Reinvest dividends to grow wealth and take advantage of compound interest

5 best platforms to buy dividend stocks uk

Here are the top brokers to invest in dividend stocks:

  • XTB
  • eToro
  • DEGIRO
  • Interactive Brokers

Let's have a closer look at each broker.

Is XTB the best broker to invest in dividend stocks?

XTB is a brokerage firm that was established in Poland in 2002, giving it more than 20 years of experience.

Initially, it primarily focused on trading with Contracts for Difference (CFDs) and forex. However, over time, XTB has expanded its offerings. Today, it is known for its extensive selection of real stocks and Exchange-Traded Funds (ETFs). Additionally, XTB allows fractional investing, which means you can invest in a portion of a stock.

XTB boasts a portfolio of over 1,900 stocks, many of which offer dividend payments. It's noteworthy to mention that trading CFDs on stock also offers dividend payments, not only holding the real stocks. In the UK, XTB is regulated by the FCA.

Key points of XTB:

  • 🏆 Regulation: FCA
  • 💼 Financial assets: real stocks and ETFs (fractional), CFDs on stocks and many other assets
  • 💲 Commissions
    • Commissions: 0%
    • Minimum Spread: From 0.5 pips
    • Inactivity fee: £10
  • 📈 Platform: xStation 5 and Mobile App

Here are the pros and cons of XTB when investing in dividend stocks:

Advantages Disadvantages
✅ Access to real stocks and ETFs❌ Withdrawal/deposit fee of £30 (under £50)
Broker without commissions
✅ It also has fractional stocks and ETFs, on which dividends can be collected

Have a look at our XTB review for more information.

Is eToro the best broker to invest in dividend stocks?

eToro is a platform that originated in Israel, and it's particularly renowned for social trading. One of its standout features is its copytrading program, which includes hundreds of investors, making the eToro community a prominent aspect of this brokerage.

eToro is regulated by two major financial authorities: the Cyprus Securities and Exchange Commission (CySEC) and the Financial Conduct Authority (FCA) in the United Kingdom. It also complies with regulations from other financial authorities in countries like Australia and the United States.

As a reliable broker for dividend investing, eToro offers several appealing options:

  1. They offer a diverse catalogue of more than 1,000 real stocks and ETFs.
  2. eToro doesn't impose any commissions, nor does it charge for dividend collection. However, it's worth noting that their spreads, which represent the difference between buying and selling prices, may be somewhat higher compared to industry averages.
  3. The platform is designed to be incredibly user-friendly, making it suitable for beginners.
  4. eToro enables investors to purchase fractional shares, allowing you to invest in a portion of a stock.

Key points of eToro:

  • 🏆 Regulation: FCA
  • 💼 Financial assets: Real (and fractional) shares, derivatives on commodities, indices, forex, copytrading
  • 💲 Commissions
    • Commissions: 0%
    • Minimum Spread: Variable
    • Inactivity fee: $10
  • 📈 Platform: Webtrader (own) and Mobile App.

Let's see the pros and cons of eToro when investing in dividends:

Advantages Disadvantages
No commissions ❌ The spread can be higher than the industry average.
✅ Access to real shares and ETFs❌ Account only available in USD.
✅ Easy to use, beginner-friendly platform❌ Withdrawal fee of $5.
✅ Fractional shares (min. $10 per order).
✅ Copytrading and ready-made portfolios available.

For more information, have a look at our eToro review.

Is DEGIRO the best broker to invest in dividend stocks?

DEGIRO offers its services across a significant portion of Europe. It's under the regulation of the FCA and it is a well-reputed European broker, mostly suitable for long-term investors.

Regarding dividends, DEGIRO promptly processes dividend payments within 48 hours of receiving them from the company. There are no charges for collecting dividends. However, DEGIRO doesn't support the purchase of fractional shares, so to be eligible for dividend collection, you must acquire at least one whole share.

Also, DEGIRO only offers real stocks and ETFs, so there are no CFDs available.

Key points of DEGIRO:

  • 🏆 Regulation: FCA
  • 💼 Financial assets: Real stocks and ETFs
  • 💲 Commissions
    • UK Stocks: £1.75 + handling £1
    • Selected ETFs: €0 + €1
    • No inactivity fee
  • 📈 Platform: Webtrader (own) and Mobile App.
Advantages Disadvantages
✅ It is regulated by FCA.❌ No fractional shares
✅ Low fees❌ The commission-based model may not be suitable for all investing styles.
✅ Includes free ETFs specialised in dividend-paying companies.
✅ Wide access to more than 30 markets
Very intuitive platform, ideal for long-term investors

Check out our DEGIRO review for more information.

Is Interactive Brokers the best broker to invest in dividend stocks?

Interactive Brokers is a globally renowned brokerage firm, established back in 1977 in the United States. It has been publicly traded on the Nasdaq exchange since 2007 and maintains a widespread presence with offices worldwide. A significant advantage of being publicly traded is that the company's financial accounts are accessible to the public, providing transparency and allowing for the verification of its financial health.

Interactive Brokers is under the regulation of major global financial entities, including the U.S. Securities and Exchange Commission (SEC) and the

Interactive Brokers is a globally renowned brokerage firm, established back in 1977 in the United States. It has been publicly traded on the Nasdaq exchange since 2007 and maintains a widespread presence with offices worldwide. A significant advantage of being publicly traded is that the company's financial accounts are accessible to the public, providing transparency and allowing for the verification of its financial stability.

Interactive Brokers is under the regulation of major global financial entities, including the U.S. Securities and Exchange Commission (SEC) and the FCA. This regulatory oversight reinforces its ability to safeguard your investments due to its substantial size and reputation.

The costs for UK stocks start at 0.05% of the traded value with a minimum of £3 per order.

In international markets, trading commissions can vary, although they typically remain competitive. For instance, other European shares denominated in euros incur the same commission as national shares. However, for U.S. shares, there is a fee of $0.005 per share, with a minimum charge of $1.

Key points of Interactive Brokers:

  • 🏆 Regulation: FCA
  • 💼 Financial assets: Access to over 150 global markets
  • 💲 Commissions
    • US Shares: From $0.005 per share (minimum $1)
    • UK Shares: From 0.05% per trade (minimum £3)
  • No inactivity fee
  • 📈 Platform: Trader WorkStation and Global Trader, ProRealTime and TradingView

Here is a list of pros and cons of choosing Interactive Brokers:

  • ❌ Structure, fees, and platforms may seem quite overwhelming for beginners
Pros Disadvantages
✅ World-class broker, very professional and with a good reputation❌ Structure, fees, and platforms may seem quite overwhelming for beginners
✅ Highly competitive costs
✅ Excellent choice of trading platforms for all skill levels and strategies.
✅ Access to any financial product, and almost any market in the world.

For more information and details, check out our Interactive Brokers review.

Features of a good broker for dividend investing

Investors who opt for a dividend investment strategy typically engage in a relatively small number of transactions each year. They often reinvest a significant portion of their dividends to grow their capital. Given this context, let's explore the key features that an ideal broker should offer:

Security and regulation

Security is paramount, especially since your funds will remain with the broker for years, possibly decades. It's crucial to ensure that the broker you choose is regulated by the FCA.

Cost structure

Generally, you should seek a broker with low overall costs. This is a good starting point. However, to maximise the effectiveness of your dividend investing strategy, it's optimal for your broker not to charge commissions for dividend payments.

Avoiding commissions for dividend collection is essential for maximising profits. This approach optimises your strategy, ensuring you make the most of your assets.

Trading costs

While seeking low trading costs is generally advisable, it's not as critical for dividend investors. Since this strategy involves fewer trades, since it's a buy-and-hold strategy, slightly higher trading commissions may be acceptable. While it's essential to minimise costs, the infrequent trading associated with dividend investing means that you won't incur substantial losses in commissions.

Real shares and ETFs

Another crucial factor is the availability of real assets within the broker's offerings. Given the long-term nature of dividend investing, it's preferable to invest in actual assets, whether they are individual stocks or Exchange-Traded Funds (ETFs).

These tangible assets provide stability and long-term growth potential, aligning well with a dividend investment strategy.

Also, derivatives like CFDs may not be suitable for long-term holding due to higher costs (such as the overnight fee for such positions).

Dividend taxation

It's important to stay up to date with taxation legislation. For the tax year 2023/24, you have a dividend allowance of £1,000. This means the first £1,000 of your dividend income is tax-free. However, from 6th April 2024, this allowance will be reduced to £500.

The tax rates on dividends above the allowance are dependent on your income tax band:

  1. Basic Rate: If your taxable income is within the basic rate band, the tax rate on dividends is 8.75%.
  2. Higher Rate: For those in the higher tax bracket, the rate is 33.75%.
  3. Additional Rate: For individuals in the highest income bracket, the dividend tax rate is 39.35%.

What are the main types of dividend stocks?

Dividend stocks are generally split into:

Dividend aristocrats

Dividend aristocrats refer to companies that have a track record of consistently paying dividends for over 25 years, and not only that, but they have also increased their dividend payments over time.

Find out what companies are considered dividend aristocrats.

Dividend kings

To identify dividend kings, we search for companies that have an uninterrupted history of paying dividends for more than 50 years and have consistently increased those dividend payments over time.

Find out what companies are considered dividend kings.

Finally, while these approaches may require you to manually pick each asset, you can also opt for a less time-intensive investing approach. You can opt for Dow Jones stocks with best dividends, check our curated best dividend stocks, or become more familiar with dividend investing before picking dividend stocks or one of the best ETFs.

Types of dividends and dates to keep in mind

Investors should familiarise themselves with fundamental concepts, such as the various types of dividends and key dates to monitor when considering dividend investing strategies.

There are several types of dividends:

  • Final dividend: Delivered at the end of the financial year to shareholders as a result of the company's profits from the previous year.
  • Interim dividend: This is a dividend payment made before a company's Annual General Meeting (AGM) and the finalisation of its full-year financial statements. Interim dividends are typically issued when a company is confident about its financial health and wants to distribute profits to shareholders throughout the year. They are often smaller than the final dividend and are paid out of the profits earned in the first half of the financial year.
  • Extra dividend: This term usually refers to any dividend paid in addition to the regular, expected dividends. It can be similar to a special or extra dividend. An additional dividend is often declared by a company when it has experienced higher than expected profits and wants to distribute a portion of these extra earnings to its shareholders. It's a way for companies to reward investors but is not typically considered a recurring payout.
  • Share (scrip) dividends: A company may offer scrip dividends when it doesn't have sufficient funds for a cash dividend. Shareholders are given the choice to receive dividends in the form of additional shares rather than cash.

As for the dates, the investor must bear in mind the dividend calendar, which allows them to know the days on which the payment will take place. But in addition to the settlement day of the dividend, it is necessary to know the ex-dividend date. It is the date on which the stock starts trading without the value of its next dividend payment. If you purchase a stock on or after its ex-dividend date, you will not be eligible to receive the declared dividend. Conversely, if you own the stock before the ex-dividend date, you are entitled to the dividend.

Learn more about stock investment

Summary

In summary, a dividend investing strategy is a conservative approach, but that doesn't make it any less effective. In fact, quite the opposite. To maximise its benefits, it's essential to select one of the best platforms. Key requirements to look for include security, minimal non-operational fees, and access to real assets. These fundamental criteria should be your priorities when choosing a broker for dividend investments.

What is a dividend reinvestment plan (DRIP)?

A DRIP is a program offered by some companies and brokers that allows shareholders to automatically reinvest their dividends in additional shares of the same company, often at a discounted price.

What is a dividend yield?

The dividend yield is a measure of the annual dividend income you can expect to receive from an investment, expressed as a percentage of the stock's current price.

What are the benefits of dividend investing?

Dividend investing can provide a consistent source of income, especially for retirees. It also allows for potential capital appreciation as companies that pay dividends tend to be financially stable.

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