10 best dividend stocks in the UK for long-term returns
Amid market uncertainty, dividend stocks are more popular than ever. Investing in stocks that pay hefty dividends is a good strategy to generate returns in the long term.
In this article, we will explore the UK market and highlight the stocks that are poised to deliver higher dividends in 2023. These are the listed companies that offer a substantial dividend yield per share to their shareholders, both in the UK and across Europe.
Europe, being the pioneer in developing a modern economy rooted in agriculture and industrial growth, has established itself as a significant economic powerhouse. Reporting a per capita gross domestic product (GDP) of $16.6 trillion (nominal) in 2022, the European Union (EU) stands as the primary trading partner for 80 countries.
While Europe’s economy is not the largest globally—currently held by the United States—with China anticipated to claim the title in the foreseeable future, it remains an attractive destination for investors seeking stable and trustworthy companies to invest in.
Best dividend stocks: forecasts in Europe
The expected increase in dividend distribution across Europe for this year is projected to exceed 1%, reaching a total of €387 billion, compared to the previous year’s distribution of approximately €382 billion among companies in the MSCI Europe stock index. Allianz Global Investors’ ‘Dividend Study 2023’ highlights these optimistic prospects and emphasises the role of dividends in enhancing the performance and stability of investments in European stocks.
According to the report, numerous European countries witnessed an upturn in dividend yields in 2022, marking a reversal from previous years of decline. Germany experienced an increase from 2.25% to 3.5%, France rose from around 2.25% to 3%, Italy surged from under 3% to 5%, Spain saw growth from just below 3% to 4%, while the United Kingdom maintained a relatively stable yield, just below 4%. Notably, the dividend yields in all mentioned countries remained significantly higher than the nominal yields of respective 10-year government bonds.
Best dividend stocks in the UK
This year, multiple companies have increased their dividend yields. Below, we’ll have a look at the top dividend stocks on the London Stock Exchange.
List of the best UK stock dividends
It’s not just existing shareholders who are interested in dividend stocks; potential investors also seek to identify stocks with high dividends. This allows them to earn returns throughout the year and consider investments in companies listed on the London Stock Exchange.
Below, you will find the best dividend stocks listed on the London Stock Exchange. The dividend amount and the month of payment for the upcoming year will depend on the individual company in which you hold shares.
To focus on stocks with the highest dividends in 2023 on the LSE, it is crucial to select companies that have consistently paid substantial dividends to their stakeholders and exhibit promising forecasts. In the UK, the following companies are noteworthy in this regard
Ranking of the best dividend stocks UK
| Titles | Dividend Yield (%) | Most Recent Dividend per Share | Dividend Growth (2022) |
| 1. M&G | 10.25% | 13.4p (interim) | 7.10% |
| 2. Phoenix Group | 8.30% | ||
| 3. Imperial Brands | 7.60% | 21.59p (interim) | 1.5% |
| 4. British American Tobacco | 6.60% | 57.725p (per year) | 1.02% |
| 5. Rio Tinto | 6.50% | $4.92 (per year) | -37.96% |
| 6. BT | 5.30% | 7.70p (per year) | 0% |
| 7. Lloyds Banking Group | 5.30% | 2.40p (per year) | 20% |
| 8. HSBC | 5.18% | 7.869p (per year) | 40.3% |
| 9. Schroders | 4.90% | 52.00p (per year) | 0.47% |
| 10. WPP | 4.80% | 39.40p (per year) | 26.28% |
However, it’s important to keep in mind that past performance is not a trustworthy indicator of future performance, so these companies may decide to alter their dividend policies at any time.
Where to buy the best dividend stocks
We provide you with a selection of the best brokers to invest in dividend stocks:
| Broker | Minimum Deposit | Products |
| Interactive Brokers | £0 | Stocks, ETFs and mutual funds, forex, bonds, options, futures, CFDs, commodities |
| eToro | $50 | Stocks, ETFs, crypto, CFDs on many other assets |
| DEGIRO | £0.01 | Stocks, ETFs, funds, bonds, options, futures |
| XTB | £0 | Real stocks and ETFs CFDs (forex, stocks, indices, commodities) |
Interactive Brokers
Interactive Brokers is one of the best stockbrokers that offers opportunities for both experienced traders, but also cost-friendly options, such as fractional shares. The cost structure is transparent and competitive – for instance, for UK stocks, the commission is 0.05% of the traded value.
To find out more about its offering, visit our Interactive Brokers review or click on the button below to visit the broker.
eToro
eToro is one of the best copytrading brokers on the market right now. It has a wide range of assets, including real stocks from global markets, funds, ready-made portfolios, cryptocurrencies, and many CFDs on assets, including stocks, indices, and commodities. For more information on this commission-free broker, check our eToro review.
DEGIRO
DEGIRO is among the selected brokers known for security, efficiency, and reliability. Unlike eToro, this broker charges commissions, and these depend on the chosen asset and market. For example, UK stocks are charged with £1.75 commission and a £1 handling fee. European stocks are charged €3.90 and a €1 handling fee, and US stocks €1 commission and €1 handling fee.
XTB
XTB, initially a Forex and CFD broker, has expanded its product offerings to include stock and ETF trading. This allows investors to choose between investing directly in stocks or trading CFDs on stocks. While the former is generally preferable for dividend investment strategies, both options have their advantages.
For instance, with CFDs, investors are entitled to receive dividends (provided they hold long positions on the stocks), and they can trade larger volumes due to financial leverage.
Check out our in-depth XTB review, or have a look at broker comparisons, such as DEGIRO vs XTB, DEGIRO vs eToro, or eToro vs XTB.
Which European stock exchanges have the highest dividend-paying companies?
Historically, the Russian Stock Exchange has been known for paying the highest dividends among European stock exchanges. However, due to the current context of the war with Ukraine, the dividend landscape has undergone significant changes. As a result, countries such as Germany, France, Italy, and Spain have emerged as notable contenders in terms of dividend payments.
Top 10 European dividend stocks
This table contains the companies with the highest dividends listed on various European Stock Exchanges:
| TITLES | Dividend Yield (%) | Sector | Ticker |
| Crédit Agricole | 8.10 | Financial | ACA |
| BMW | 6.48 | Automotive | BMW |
| Covestro | 8.02 | Chemical | 1COV |
| Hapag Lloyd | 19.85 | Travel | HLAG |
| Orange | 7.02 | Telecommunications | ORA |
| Basf | 6.45 | Energy | BAS |
| AstraZeneca | 1.89 | Pharmaceutical | AZN |
| Endesa | 7.64 | Energy | ELE |
| Volkswagen | 20.81 | Automotive | VOW3 |
| Airbus Group | 1.06 | Transport | AIR |
How to search for the best dividend stocks?
The best stocks to buy for dividends are characterised by:
- High dividend yield (dividend amount divided by current share price)
- Strong growth: stocks with steady growth
- Low risk: stocks with low volatility
What to look for when choosing the company:
- Continuous and stable growth.
- Low debt: a company with a high level of debt could collapse. The debt ratio (total liabilities divided by total assets) should be lower than 0.6.
- Competitive advantage: for example, owning a patent or a large market share.
- Long-term profitability.
Why should you buy stocks that pay high dividends?
The answer is straightforward: to capitalise on the power of compound interest by reinvesting the dividends earned.
While some companies choose not to offer dividends and instead reinvest profits for further growth, companies that are more likely to pay dividends are those that have already established themselves in the market.
It’s important to note that investing in dividends is a long-term strategy, as short-term fluctuations and volatility can occur even in seemingly safe stocks. Therefore, it is advisable to invest in established companies with a track record of consistent dividend payments and stable income streams.
Given the current uncertainty in Europe and the global impact of the war between Russia and Ukraine, certain sectors, particularly those related to raw materials, may experience product shortages and present interesting dividend yields.
However, if you prefer a more cautious approach, focusing on listed companies with a strong dividend track record would be advisable, considering the individual financial performance of each company.
If you are new to this concept, don’t miss our dividends guide to learn how to invest in them, and this guide on dividend investing to become familiar with key dividend-related terms.
Other recommended articles
- Dividend kings
- Dividend aristocrats
- Dow Jones Stocks with Best Dividends
- Stock market for beginners
- Where to invest in 2023?
- Investing in stock market
Best dividend stocks: summary
Investing in dividend stocks can be a compelling strategy for long-term investors seeking both income and potential growth. This article explored the world of dividend stocks in UK markets, highlighting some of the best performers on the market, but also recommending good brokers to invest in the best dividend stocks. If you are a long-term or passive investor, you may also want to check this article on the best copytrading brokers, which rounds up the top platforms that allow you to copy successful investors or traders within a few clicks.
Dividend stocks FAQs
Are dividend stocks suitable for all types of investors?
Dividend stocks can be suitable for a wide range of investors, but it ultimately depends on their individual investment goals and risk tolerance. Dividend stocks are particularly attractive to income-focused investors who seek regular cash flow from their investments.
How can I identify high-quality dividend stocks?
Identifying high-quality dividend stocks involves thorough research and analysis. Some key factors to consider include a company’s historical dividend track record, consistent and sustainable earnings growth, strong financial health, and a stable business model.
Should I reinvest dividends or receive them as cash?
The decision to reinvest dividends or receive them as cash depends on individual investment objectives and preferences. Reinvesting dividends allows investors to benefit from the power of compounding, as the dividends are used to purchase additional shares, potentially leading to long-term growth.
