Best UK Dividend Stocks to Consider Buying in June

Every month we ask our freelance editors to share their best dividend stock ideas with you — here’s what they had to say for the month of June!

(Just starting your investment journey? Check out our guide to find out how to start investing in the UK.)

IG Group

What it does: IG Group is a global financial technology company providing online trading platforms and related educational resources.

By Kevin Godbold. The dividend record for IG Group (LSE: IGG) has been stable, with no cuts since at least 2018. The company has even maintained its payouts during the pandemic. Meanwhile, the compound annual growth rate (CAGR) of the dividend stands at around 0.91%.

With shares close to 802p (May 20), the forecast return is just under 6% for the trading year to May 2025.

The company diversified and expanded its activities. However, business performance tends to improve with market volatility, when people often trade more in the markets. There is therefore a cyclical risk here for shareholders.

Nonetheless, in March the company reported flat year-over-year revenue, “despite the lowest level of volatility in more than five years”.

The company’s business and financial stability is encouraging and I would consider including the stock in a diversified portfolio of dividend stocks.

Kevin Godbold does not own shares in the IG Group.

ITV

What it does: ITV is the UK’s largest commercial broadcaster. It also operates a program production business, ITV Studios.

By Roland Head. ITV (LSE: ITV) has been out of favor with investors for a long time, but I think the tide is starting to turn.

After a sharp decline in advertising last year, ITV recently announced a 3% increase in advertising revenue in the first quarter. Management expects a 12% rise in the second quarter, helped by EURO 2024 soccer.

ITV also revealed it had wiped out the deficit in its major pension scheme, which is now in surplus. No additional cash contributions are required, removing a significant drag on cash flow.

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The risk is that ITV remains a legacy company that is not big enough to compete with the big streamers.

Personally, I don’t buy this vision. ITV has 33% of commercial programming in the UK and also makes programs for major streamers, including in the US.

I think ITV’s dividend now looks safe, offering a 6.4% yield with potential to grow.

Roland Head owns shares in ITV.

Legal and general

What it does: Legal & General provides retirement, wealth, insurance, investment management and capital investment solutions.

By Andrew Mackie. A recent increase in Legal and general (LSE:LGEN) share price means the dividend yield is not as attractive as it was a month ago. However, with a forward yield of 8.4%, I continue to steadily accumulate shares of the company.

The key to dividend investing is sustainability. Between 2020 and 2023, the net generation of surplus capital was £800 million higher than the total dividends distributed. He comfortably expects this trend to continue in FY24. Longer term, I remain confident that shareholder returns will remain a key tenet of his strategy.

One of the most exciting growth areas for the company is pension risk transfer (PRT). Companies turn to L&G to reduce the risks associated with their defined benefit pension plans. He estimates that only 10% of these pension commitments have been settled to date.

One of the main risks for the company today remains interest rates. The longer rates remain high, the greater the risk that the value of its vast real estate and bond portfolios will be revalued, impacting profitability. But I take a long-term view when investing and remain confident in its ability to withstand any economic downturn, as it has many times in the past.

Andrew Mackie owns shares in Legal & General.

Tritax EuroBox

What it does: Tritax EuroBox invests and manages logistics real estate in continental Europe.

By Paul Summers: As long as I’m willing to take (arguably) more risk, I think the warehouse owner and manager’s dividend stream Tritax EuroBox (LSE: EBOX) looks very attractive.

The expected yield currently stands at 7.2%. There aren’t many stocks offering more in the UK market.

While income is the primary focus here, I’m also positive about this real estate investment trust’s ability to generate nice capital appreciation in time, given the high likelihood that online shopping will continue to gain in popularity. This means increased demand from retailers to lease the type of “big box” spaces they own.

My main concern is how long we will have to wait for the interest rate cuts to arrive. Like everything related to real estate, Eurobox shares have gone out of fashion in recent years and I imagine many of its investors are growing impatient.

Staying diverse remains vital in my opinion.

Paul Summers has no position in Tritax EuroBox

The article Best UK Dividend Stocks to Consider Buying in June appeared first on The Motley Fool UK.

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The Motley Fool UK recommended ITV. The opinions expressed about companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a broad range of information makes us better investors.

Motley Fool UK 2024