With such high uncertainty surrounding the UK’s economic outlook, dividend shares haven’t exactly been delivering the best performances lately. Or at least, that’s what some of the stock prices would suggest. Yet looking deeper at the underlying businesses, there are plenty of companies offering impressive yields backed by strong financials.
With that in mind, here are two top dividend stocks I’m eager to add to my portfolio in 2022.
Building passive income from cardboard boxes
Sometimes a terrific business doesn’t have to offer a ground-breaking product. That’s certainly true, in my opinion, for DS Smith (LSE:SMDS). The company is a manufacturer of cardboard boxes. As boring as that sounds, it’s a critical component of the rapidly expanding e-commerce industry.
Lately, these dividend shares haven’t been top performers. In fact, the stock is actually down 36% over the last 12 months. There are undoubtedly numerous factors at play. But one primary catalyst behind this lacklustre performance is the drop in consumer spending. With fewer items being purchased online, there are growing fears that demand for DS Smith’s products is set to drop.
While it’s certainly a valid concern, I’m personally not worried. Why? Because it’s ultimately a short-term problem. In the meantime, looking at the latest results paints quite a different picture. Revenue for its 2022 fiscal year ended April was up 21% year-on-year. Pre-tax profits surged 64% courtesy of expanding margins, and dividends were even boosted by 24% to 15p per share.
That certainly sounds like solid progress, in my mind. And with a 5.6% dividend yield, I’m quite tempted to snatch up some shares for my passive income portfolio.
One of the best UK dividend shares to buy?
Sticking to the theme of ancillary e-commerce services, Warehouse REIT (LSE:WHR) is another company that’s caught my attention. The group owns and manages a vast portfolio of last-mile warehouses scattered across the United Kingdom.
These facilities are leased out to businesses of all sizes, predominantly as online order fulfilment centres. And with demand for well-positioned logistical centres skyrocketing while availability shrinks, management has had little trouble growing its operations.
Much like DS Smith, fears of an e-commerce slowdown and property market correction have caused these dividend shares to stagnate for most of the last 12 months. In fact, the stock price has remained basically flat in the past year. These fears are somewhat warranted. After all, if e-commerce demand drops, some of the firm’s smaller tenants may not renew their lease agreements. And management may simultaneously struggle to find replacements.
Yet, once again, this does not seem to reflect the underlying company, whose leasing operating profits came in 43% higher at £35.4m. With a business having a track record of expanding its dividend policy in line with profit growth, it’s not surprising to see the total dividends paid surge by a similar level. And today, this business offers an impressive 4.3% yield for my passive income portfolio.