I’m thinking about investing in the best dividend stocks. Here are five top UK income shares (in no particular order) on my shopping list right now.
Centamin
Buying gold stocks remains a good idea in my book as prices rocket and economists raise their inflation forecasts.
This week, Bank of England (BoE) policymaker Michael Saunders was the latest to warn of the strain. He said: “Inflation pressures would probably be greater and more persistent” than the BoE expects, if further rate rises are not forthcoming.
This comes just days after the BoE said consumer price inflation would hit 10% in 2022.
The big question is if the BoE (like other central banks) will be able to hike rates as aggressively in the months to come as global growth grinds to a halt. I’m not so sure they will.
As I said, buying gold mining stocks could be a good idea amid this high prospect of low growth and high inflation (or ‘stagflation’). And Egypt-focussed Centamin (LSE: CEY) is one on my radar, thanks to its 5.3% dividend yield.
I must remember though, that resurgent safe-haven buying of the US dollar could harm Centamin’s profits. A rising greenback essentially makes it more expensive to buy gold, hitting metal demand from investors.
Glenveagh Properties
Ireland’s shortage of new housing is vast. Even as interest rates rise, homes demand continues to outpace supply, supporting strong trading for the country’s homebuilders.
Glenveagh Properties (LSE: GLV) is a case in point. In late April’s trading update, the business said it continues to witness “strong demand” for its homes. Revenues rose 105% at Glenveagh back in 2021, thanks to higher completions (up 64%) and climbing property prices.
Pleasingly, Glenveagh’s boosting production to make the most of these fertile trading conditions too. It is on track to deliver 1,400 suburban homes in 2022, up from the 1,150 completions it sealed last year.
However, I am concerned about the impact of rising raw material and labour cost on Glenveagh’s bottom line. But as of today, the business continues to bat back against these pressures. It said last month that “the underlying strength of the market and [our] attractive product offering” means house price inflation continues to outpace cost rises.
Today, Glenveagh carries a mighty 6.5% dividend yield. I expect dividends here to impress long beyond 2022 as well.
Banco Santander
Investing in economically-sensitive shares like banks is risky business today as global growth cools.
However, some financial industry stocks are so cheap that I think they represent attractive value. Banco Santander (LSE: BNC) is one such stock that has caught my attention with its excellent all-round value.
For 2022, Santander trades on a forward price-to-earnings (P/E) ratio of around 5.1 times. The banking giant also carries a mighty 6.9% dividend yield.
As a long-term investor, Santander has plenty of appeal for me. This is because the company has significant exposure to Latin America. And it’s stepping up investment there to capitalise on soaring demand for financial products.
In December, it announced plans to spend $6bn on digital transformation there between 2022 and 2024. It said the investment would “expand operations and further improve customer service” in the region.
Rising personal incomes are supercharging demand for loans, bank accounts and similar services. Yet product penetration here remains low, giving Santander colossal sales opportunities. Researchers at McKinsey & Company have said they expect Latin America “to remain the growth leader in banking” and for banking penetration rates to keep climbing.
Antofagasta
FTSE 100 mining stock Antofagasta (LSE: ANTO) is another stock I’d buy for its big dividends today. The yield here for 2022 sits at a tasty 5.5%.
Unlike Centamin — whose share price could rise strongly in the near term alongside gold prices — Antofagasta is in danger of slipping as stagflation sets in. Copper is an economically-sensitive commodity and prices could slip sharply, pulling Antofagasta’s profits down in the process.
Particularly concerning are signs of economic strain in China. Fresh Covid-19 lockdowns are hitting the country hard and latest data showed exports hit two-year lows. Worringly for Antofagasta, China accounts for half of all copper demand.
However, I’m someone who invests in stocks based on their long-term outlook. And I think Antofagasta is looking good as the green revolution clicks through the gears.
Soaring demand for electric vehicles (and associated infrastructure) and renewable energy technology look set to supercharge copper consumption this decade. Antofagasta can also expect demand for its metal to light up as global construction rates soar and sales of consumer electronics boom.
Goldman Sachs thinks copper demand will soar 600% between now and 2030.
Royal Mail
Royal Mail’s (LSE: RMG) share price has fallen heavily during the course of 2022. This has pushed the dividend yield up to a robust 7%.
I think this makes the FTSE 100 firm a screaming buy. That’s even though there are risks facing Royal Mail in the near term and beyond. E-commerce sales have fallen sharply from Covid-19 levels, hitting parcels traffic at the courier. Conditions could remain tough too as the cost of living crisis hits consumer spending.
There’s also the problem of high restructuring costs as Royal Mail adjusts to the digital shopping era. The threat of industrial action is also never far away.
But it’s my opinion that Royal Mail still remains a top buy today. I think traders and investors have been quite short-sighted in selling the stock so heavily. E-commerce in the UK is set for strong and sustained growth following this post-pandemic adjustment.
Analysts at Worldpay think the British e-commerce market will grow 26% between 2021 and 2025 to $260bn. Demand for Royal Mail’s services should rebound strongly, in my opinion.