Picking the best UK dividend stocks right now isn’t an easy task. This year, over 40 companies in the FTSE 100 index have suspended or cancelled their dividend payouts. There’s no guarantee that, post Covid-19, the big dividend payouts we’ve seen in recent years from Footsie companies will be resumed.
If you’re looking for top UK dividend stocks to buy and hold for the long term, I’d suggest you focus your search on several key sectors. Some sectors are far more reliable than others when it comes to dividend payouts.
Consumer Defensives: home to leading UK dividend stocks
The first sector I’d turn to for top dividend stocks is Consumer Defensives. This sector includes consumer goods, alcoholic beverage and tobacco companies, as well as supermarkets.
Consumer goods companies, in particular, are often top dividend stocks. That’s because these tend to generate very consistent revenues and earnings throughout the economic cycle, which translates to consistent dividends.
One dividend-paying consumer goods company I like a lot is Unilever. It owns a world-class portfolio of consumer brands, which includes Dove, Knorr, and Lipton. This FTSE 100 stock has a fantastic long-term dividend track record and currently sports a forward-looking yield of around 3.4%. That’s an attractive yield in the current environment.
Another dividend-paying consumer goods stock I hold in high regard is Reckitt Benckiser. It owns a top portfolio of health and hygiene brands which includes Dettol, Lysol, and Nurofen. Like Unilever, it has a great dividend track record. Over the last 20 years, it’s lifted its dividend significantly. Currently, the stock sports a yield of about 2.3%.
Both of these UK companies are highly reliable dividend payers. Both should continue paying them to their investors in the near term, irrespective of what happens with Covid-19, or to the economy. That makes them top dividend stocks, in my view.
Healthcare: a source of reliable dividends
Another sector that’s home to a number of top dividend stocks is Healthcare. Demand for this sector tends to remain pretty steady no matter what the economy is doing. This means consistent dividends for investors. If I was looking for the best UK dividend stocks to buy and hold for the long term today, I’d definitely look at stocks in the healthcare sector.
One dividend stock I like is Smith & Nephew. It specialises in hip and knee implants and wound management solutions. It has a fantastic track record, having paid a dividend on its ordinary shares every single year since 1937.
In the short term, we can’t rule out a dividend cut here because Covid-19 has disrupted the company’s markets significantly this year. However, looking beyond the near-term uncertainty, I expect Smith & Nephew to continue paying dividends on a regular basis. SN shares currently sport a trailing yield of about 1.9%.
Top UK dividend shares
Of course, there are plenty of other reliable dividend payers on the London Stock Exchange. Diageo, Sage, and Prudential are some other UK dividend stocks I believe have a lot of potential.
If you’re looking for the best UK dividend stocks, you’ll find plenty of ideas right here at The Motley Fool…