With that in mind, here are two British stocks that, in my opinion, offer attractive passive income prospects.

What if UK dividend shares offered inflation-adjusted returns?

One of the primary catalysts behind the ongoing stock market correction was the spike in inflation, especially in regard to energy bills. But what if there was a way to profit from the surging electricity bills? That’s where Greencoat UK Wind (LSE:UKW) comes into the picture.

The company owns a portfolio of onshore and offshore wind farms scattered across the UK. The business model is simple:

1. Acquire a stake in a wind farm
2. Let it generate clean electricity
3. Sell that electricity to the national grid through a long list of corporate clients

The proceeds are then distributed to shareholders through an impressive 4.6% dividend yield that management automatically increases in line with the retail price index – a proxy for inflation.

With fixed operational costs, the rise in electricity prices has translated into almost pure profit. So it’s not surprising that in the last six months underlying earnings exploded from £128m in 2021 to £566m at a 97% profit margin!

These elevated prices obviously won’t last forever. And when regulators inevitably reduce the price caps, they could stay that way for a prolonged period as they have done in the past. Needless to say, that wouldn’t be good news for the shares of this UK dividend group.

Regardless, I feel it’s a risk worth taking. The skyrocketing earnings grant management a lot of flexibility to improve the balance sheet’s strength and reinvest for long-term growth. And that’s why I recently added some shares to my income portfolio.

Earning a passive income through royalties

The mining sector is not short on UK dividend shares offering impressive payouts. But one from my portfolio that continues to be my favourite in this space is Anglo Pacific Group (LSE:APF). It’s a royalties business that funds mining companies to establish a new extraction site in exchange for some of the dug-up materials.

Historically, the bottom line has primarily been driven by its coal assets. And that’s still true today. However, management has long since been reducing its dependence on the material by diversifying its product portfolio. Lately, it’s been hyper-focused on adding more cobalt, nickel, and copper projects to help meet the demand for electric vehicle batteries and renewable energy technologies.

Mining is a cyclical industry. And while Anglo Pacific may not be doing any drilling, it’s just as susceptible to fluctuating commodity prices. We’ve already begun to see some raw materials drop on fears of a recession. And one of its most lucrative coal mines is coming to the end of its life within the decade.

Those risks can’t be ignored. But management seems to have a sound strategy for replacing the eventual revenue loss. And with global cobalt supply highly restricted, I believe these UK dividend shares offer an attractive long-term source of income at a 4.5% yield. That’s why I’m considering topping up my current holdings.

With that said, what are some of the best income stocks for my portfolio today? Let’s explore my favourites.

Becoming a renewable energy baron

When investing in dividend stocks, I’m drawn to the companies I believe will remain relevant for at least the next 10 years. And I think it’s fair to say that electricity will still be in demand a decade from now.

Most of the electrical grid is powered by gas turbines in the UK. Yet renewables are starting to become a more significant contributor. And that makes Greencoat UK Wind (LSE:UKW) rather promising, in my opinion. This business owns a vast network of on- and off-shore wind farms generating clean electricity.

It’s not a risk-free investment, of course. Being a real estate investment trust, most of the profits are returned to shareholders generating a 4.7% yield today. But that means there’s little capital left for reinvestment and, consequently, management has loaded up on debt over the years. With interest rates rising, profit margins will undoubtedly get squeezed, potentially compromising the passive income stream.

Having said that, net profit margins currently stand at a massive 86%. Therefore, I think Greencoat can absorb this increased pressure without much trouble. And that’s why it’s number one on my list today.

Generating passive income from e-commerce

The rise in popularity of online shopping continues to trend upward, even with the pandemic no longer keeping brick & mortar stores shut. But e-commerce is creating a big problem regarding logistics that Warehouse REIT (LSE:WHR) is trying to solve.

The business owns and leases a network of warehouses across the UK, predominantly to large online retailers like Amazon. With demand for well-positioned facilities on the rise and the supply quickly running out, Warehouse REIT has consistently increased rent, boosting dividends to a 4% yield today.

It’s far from the only player in the space. And the rising level of competition is making the acquisition of new prime locations more challenging. However, with an occupancy rate of 93.5% and average lease duration steadily rising over time, I think Warehouse REIT could be a fine addition to my passive income portfolio.

Digging for 21st-century metals

As the world slowly transitions to eliminate carbon, technologies like renewable energy and electric vehicles (EVs) are rapidly being adopted. But it’s creating a supply problem for battery metals such as cobalt, copper, and vanadium. This has proven to be quite advantageous for Anglo Pacific Group (LSE:APF). The mining royalties business has an equity interest in 15 sites worldwide, eight of which are actively producing.

Commodities are indeed notoriously cyclical. And that’s a pattern which is unlikely to change anytime soon. As such, the bottom line has been wobbly over the years, leading to an equally wobbly dividend.

However, despite this risk, I don’t see demand for battery metals disappearing anytime soon, especially now that more EV manufacturers are entering the picture. Hence why this stock is on my passive income investment list today.

Edward Sheldon: Unilever

My top income stock for May is consumer goods company Unilever (LSE: ULVR). Analysts expect it to pay out €1.71 in dividends for 2022, which equates to a prospective yield of around 3.9%.

There are a couple of reasons I like Unilever in the current environment. The first is that the company is relatively recession-proof. People tend to buy its every-day essentials like soap and cleaning products irrespective of economic conditions. The second is that, due to its strong brands, the company has the ability to raise its prices. This should offer protection against inflation.

Of course, with inflation so high, the company could still face challenges. However, with the stock trading at 18 times this year’s expected earnings, I like the overall risk/reward.

Edward Sheldon owns shares in Unilever

Zaven Boyrazian: Anglo Pacific Group

Anglo Pacific Group (LSE:APF) is a global royalty mining business with a diverse portfolio of natural resources. Today, the company has eight extraction sites scattered across the world, producing primarily cobalt, vanadium, copper, uranium and coking coal (used in steelmaking).

Mining is a cyclical industry, which can lead to prolonged periods of poor performance when commodity prices fall.

However, management is aggressively transitioning its portfolio towards metals essential to renewable energy technology. And since demand, in my opinion, is unlikely to disappear any time soon, I believe Anglo Pacific Group will continue to reward investors with sizable dividends for many years to come.

Zaven Boyrazian owns shares in Anglo Pacific Group.

Roland Head: Burberry

I’m choosing luxury brand Burberry Group (LSE: BRBY) as my income stock for May. This FTSE 100 firm is now trading at levels not seen since the 2020 market crash.

I think that’s probably too cheap for a business with a track record of high profit margins and long-term growth. As the pandemic recedes, broker forecasts suggest profits could hit record highs next year.

Changing shopping habits in China are a key risk. But Burberry’s dividend hasn’t been cut for 20 years and the stock’s forward yield of 3.2% is above its long-term average. I can see value here.

Roland Head owns shares of Burberry Group.

Paul Summers: IG Group

Online trading platform provider IG Group (LSE: IGG) is my pick. I think it remains a decent way of hedging against market volatility. 

It’s also a great source of dividends. IG is forecast to yield almost 7% in FY23 (which begins at the start of June). This payout is also sufficiently covered by expected profit. When combined with a very solid balance sheet, this makes me think a cut is unlikely. 

While ongoing regulation of its industry remains a risk, I think this is already priced in. Available for just 8 times forecast earnings, I am strongly considering buying more.

Paul Summers owns shares in IG Group

Andrew Mackie: Aviva

My top income stock for May is Aviva (LSE: AV). When I invested in the company, I certainly did not do so in anticipation of stunning growth. But I have always viewed it as a sleeping giant given its sector-leading brand.

With a new CEO in place who has cleared out a lot of the dead wood from its portfolio, the dividend is now starting to climb again.

In 2022, it has forecast a dividend payment of 31.5p per share. At today’s share price, that equates to an inflation busting yield of 7.5%. Further, it expects the dividend to grow to 33p in 2023 and by low-to-mid single digit in subsequent years.

Andrew Mackie owns shares in Aviva.

Royston Wild: National Grid 

Now could be a good time to buy for me to buy utilities stocks as market volatility increases. Shares like these might rise in value in May as concerns over more cyclical shares gather steam. 

FTSE 100 power grid operator National Grid (LSE: NG) is one such share on my watchlist. I like it because the essential services it provides delivers excellent profits stability at all points of the economic cycle. 

I also like National Grid because it has a monopoly on maintaining the electricity grid. A consequent lack of competitive pressure provides earnings forecasts with extra strength. 

Today, National Grid carries a healthy 4.5% dividend yield. 

Royston Wild does not own shares in National Grid. 

G A Chester: Unilever 

Historically, it’s rare for consumer goods giant Unilever (LSE: ULVR) to be on offer with a dividend yield above 4%. But that’s currently the case. 

The group’s trusted brands — the likes of Lifebuoy, Domestos, Ben & Jerry’s, and Hellmann’s — tend to generate relatively reliable cash flows through the economic cycle. The combination of this ‘defensive’ quality of the business and the current yield makes Unilever my top income stock right now. 

The market is concerned about what the company concedes is “unprecedented cost inflation,” but so far management has successfully countered this with pricing action. 

G A Chester has no position in Unilever. 

That certainly doesn’t sound pleasant. However, I’ve spotted three potentially interesting passive income opportunities for my portfolio that might be immune to this suffering. And to top it all off, these dividend stocks are also looking rather cheap. Let’s explore!

Profiting from inflation

Not all businesses suffer from rising material prices. The mining sector is actually a great beneficiary of commodity inflation as operational expenditures are mostly fixed. In other words, rising metal prices almost directly translate into wider profit margins.

With that in mind, Anglo Pacific Group (LSE:APF) looks particularly promising. The company is a royalties business, meaning it doesn’t actually do any mining. Instead, the firm provides initial funding for other groups to set up an extraction site in exchange for a portion of the minerals dug up.

With skyrocketing demand for Anglo Pacific’s products, including battery metals like cobalt, copper, and vanadium, profits have exploded. Looking at the latest results, royalties have surged by 80% to $85.6m (£65.8m), pushing after-tax income to $37.5m (£28.8m) – a trend I feel is likely to continue throughout May and the rest of the year.

Commodity prices will eventually start to fall as other mining groups seek to capitalise on the opportunity. And that will undoubtedly impact the firm’s impressive 44% profit margin. However, today, the stock offers a solid 3.8% dividend yield at a relatively cheap price-to-earnings ratio of 13.5. Therefore, personally, I feel this is a risk worth taking.

Is this a recession-proof dividend stock?

With consumers looking to cut spending, plenty of premium and luxury products are often the first to get dropped from shopping lists. But as budgets get tighter, the allure of discount retailers like B&M European Value Retail (LSE:BME) gets more potent.

While product variety can be somewhat limited, customers can often find popular branded items at significantly lower prices than in an average supermarket. And with management aggressively expanding its store count in recent years, the group looks perfectly positioned to offer its low prices to the vast majority of the British population.

Having said that, B&M is by no means a risk-free investment. The firm’s lack of online presence could be to its detriment over the long term. Meanwhile, its expansion into France also exposes the bottom line to fluctuating exchange rates.

Yet these risks are worth taking when looking at the valuation. At least that’s what I think. Today, the stock trades at a relatively cheap price-to-earnings ratio of 12.8, which comes paired with a respectable dividend yield of 3.3%. And that, to me, looks like a strong candidate to add to my income portfolio in May and beyond.  

But with the April deadline fast approaching, what are the best UK shares for me to buy in my ISA right now? Let’s explore.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Profiting with pizza

Domino’s Pizza Group (LSE:DOM) has been on quite a run. Since the start of 2019, shares are up over 50%, thanks to impressive growth in pizza sales. The pandemic certainly helped in that regard. But the momentum has since continued.

And now that management has resolved its long-standing franchisee conflict, growth might be about to accelerate even faster. Or at least, that’s the impression I got when the firm announced its £1.9bn sales target versus £1.5bn today.

A good chunk of this growth can be attributed to the continued digital transformation of the group. But of course, that does create a potential vulnerability. Suppose a successful cyber attack takes its systems offline, even for a short time? In that case, it could lead to a substantial loss of orders to competitors. Nonetheless, with its shares falling by 20% since the start of 2022, courtesy of market volatility, the UK business looks like a bargain buy for my portfolio.

UK shares fuelling the renewable energy era

With global warming becoming an ever more present threat, the world has begun making the necessary shift towards renewables. But to achieve this ambitious transition, a lot of raw materials are going to be needed, especially essentials such as battery metals including cobalt and vanadium.

This has created quite the tailwind for UK mining shares. And while there are plenty to choose from, my personal favourite is Anglo Pacific Group (LSE:APF). The royalties business provides the funding for larger mining firms to establish drilling sites in exchange for a portion of the extracted materials.

This approach has proven to be significantly more profitable, with operating margins currently standing at over 45%. It’s obviously still susceptible to the risks of fluctuating commodity prices. However, with a diversified portfolio consisting of essential renewable energy metals, I think the stock could be perfectly positioned to deliver long-term growth potential to shareholders. Even more so when considering it’s still trading at a 20% discount to pre-pandemic levels despite superior financial performance.

The small-cap behind modern technology

With the world’s dependence on technology growing even bigger, XP Power (LSE:XPP) is currently enjoying a pretty massive tailwind. The group is a designer and manufacturer of electronic components for equipment used throughout the industrial engineering, healthcare, and semiconductor industries.

The latter is particularly exciting as supply chain disruptions are currently driving substantial investments into this space. That’s obviously a highly lucrative opportunity and has so far resulted in a 46% jump in its semiconductor division revenue last year.

However, it’s not without its flaws. With 80% of revenue originating from its factories in China and Vietnam, the UK shares have recently been under a lot of pandemic related pressure in that region of the world. But while this problem may continue to plague the business in 2022, it’s ultimately a short-term issue. That’s why the stock’s recent 32% tumble since the start of the year looks like an excellent buying opportunity for my portfolio today.

But as unpleasant as it is to watch my portfolio suffer, I’m not worried. Why? Because I’m following a tried and tested strategy that, over the long-term, transforms these periods of increased volatility into potential gold mines. Let’s explore.

The key to beating a stock market crash

Buying shares is not a risk-free endeavour. Even some of the most mature businesses considered ‘safe’ can be vulnerable to external factors. Investors in travel stocks know this all too well after the pandemic decimated even the strongest firms in this industry.

But if I thoroughly research a business before buying any shares, finding weaknesses is pretty straightforward. And this is the strategy to beat a stock market crash. By knowing the weak points of the companies in my portfolio, I can make smarter decisions when a downturn inevitably rears its ugly head.

The current situation is undoubtedly being fuelled by multiple factors. But the three biggest ones that I can see are inflation, rising interest rates, and the tragic geopolitical crisis in Ukraine. The latter took many investors by surprise. So, I’m not shocked to see the knee jerk reaction of a market-wide sell-off.

But while the world panics, the trick is to remain calm. Looking at the companies in my portfolio, despite several suffering pretty impressive drops, none appear to be directly affected by the catalysts of the ongoing stock market crash. And that’s a buying opportunity in my opinion. Let’s take a look at an example.

Buying when others are selling

One stock from my portfolio that recently got caught in the crossfire is Anglo Pacific Group (LSE:APF). I’ve explored this business before. But as a quick summary, this is a royalties company. It provides mining firms like Rio Tinto and BHP the necessary funding to establish drilling sites in exchange for a portion of the materials dug up from the ground throughout the life of the mine.

The stock market crash intensified when the Russian invasion began, and shares tumbled as much as 10% within a few days. But here’s the thing. Anglo Pacific doesn’t have any operations in Eastern Europe. What about rising interest rates and inflation?

There’s currently around $124m (£94m) of debt on the balance sheet that’s getting more expensive because of higher interest charges. However, with substantial cash flows, Anglo Pacific should have no trouble paying a higher rate. Meanwhile, inflation is actually pushing up commodity prices, which is beneficial to the group’s bottom line.

In other words, the main factors pushing the market down are either irrelevant or beneficial to this business. So, when the stock started tumbling, that looked like a buying opportunity in my eyes. And it seems others agree because the shares have since surged 18% despite no official announcements from management.

The bottom line

Finding buying opportunities in high-quality businesses that are seemingly unaffected by the catalysts behind a stock market crash is the best way to beat it, in my opinion. And while it does involve taking risks, the potential returns for my portfolio are well worth it.

Surging profits, dwindling share price

I’ve explored Anglo Pacific Group (LSE:APF) before. But as a reminder, this is a royalties mining business. It provides the upfront funds for mining companies like Rio Tinto to develop a mining site in exchange for a percentage of the materials dug up from the ground.

In recent years, management has been expanding its portfolio of sites to focus on renewable and battery metals. In early 2021, the group completed its largest acquisition to date, adding a sizeable cobalt stream to its royalties. And with demand for the metal surging, courtesy of the electric vehicle space, the company is already reaping the rewards.

Its cobalt mine alone contributed a total of $16.5m (£12.2m) last year. And with supply chain disruptions pushing up material prices, the group’s total revenue surged by 95% to a new all-time high! Yet despite this impressive growth, shares of this UK business are actually flat over the last 12 months and still trade below pre-pandemic levels.

The rising materials prices obviously haven’t gone unnoticed by the competition. And with many looking to capitalise on the situation, the supply will eventually meet the demand. This would undoubtedly send metal prices back down and disrupt Anglo Pacific’s impressive underlying growth.

But over the long term, demand for raw materials isn’t likely to disappear. And at today’s price combined with a 6.3% dividend yield, this could be one of the best UK shares to buy today for my portfolio. At least, that’s what I think.

Digging for profits with UK shares

Continuing the theme of mining companies, Glencore (LSE:GLEN) is another that has caught my attention this week. Just like Anglo Pacific, the group has a diversified metals portfolio geared towards renewable energy metals like copper, cobalt, and nickel.

The group has also profited from rising materials prices. So, it’s hardly surprising to see the revenue stream expand by 43%, hitting $203.8bn (£150.1bn) in 2021. Meanwhile, profits returned to their highest point since 2018. What’s more, with inflation pushing up metal prices even higher, it’s possible that the financial performance of 2022 could be even more groundbreaking. That’s why I think this could be one of the best shares to buy and hold today.

Of course, there are some risks to consider. On top of the exposure to fluctuating commodity prices, Glencore’s cobalt production comes mainly as a by-product of its copper mining activities in the Democratic Republic of Congo. This region is not exactly known for political stability, and should a shake-up in government occur, Glencore’s mining activities could become compromised.

However, with additional cobalt streams pouring in from Australia and Canada, along with the rest of its metals portfolio, I feel buying and holding shares in this UK mining group is a risk worth taking.

Fortunately, that task is less complicated at the moment since fears surrounding rising inflation have got the stock market in a bit of a huff. And that’s how I spotted Anglo Pacific Group (LSE:APF). Let’s explore what this business does and why I’m keen to buy more shares, even with as little as £100.

A royalty company for a renewables world

I’ve explored this UK share before. But as a quick reminder, Anglo Pacific is a mining royalty company. It provides the necessary funds for other mining businesses like BHP and Rio Tinto to develop an extraction site once all the initial exploration surveys are completed. In exchange, it receives a percentage of the materials extracted from the ground throughout the lifetime of the mine.

Inflation is bad for most businesses, but it’s actually quite beneficial for mining groups. Why? Because mining is a largely fixed cost operation. So, when inflationary pressure pushes commodity prices up, profit margins begin expanding. And just looking at the company’s latest results, the effects are evident.

Total income from its royalty portfolio throughout 2021 grew by a staggering 80% reaching £85.6m. That’s even higher than 2019 levels when the pandemic wasn’t disrupting operations.

£48m of this income originated from its Kestrel coking coal mine in Australia. That obviously poses as a single asset risk, as well as a commodity that the world is slowly phasing out. But thanks to portfolio diversification over the years, this proportion of income has been steadily falling.

What’s more, it’s being replaced with new renewables-facing commodities, including copper, vanadium, and more recently, cobalt. This latter metal was responsible for £16.5m of royalty income alone last year and is a critical ingredient in electric vehicle batteries.

Is this UK share too cheap?

Despite generating record-breaking royalty income, the share price of this UK business doesn’t seem to reflect that performance. It’s true that over the last 12 months, the stock has climbed by a respectable 10%. But it’s still trading well below pre-pandemic levels, even though from an operational standpoint, the group is in a much stronger position. Yet there might be a reason why the stock is trading at a discount.

A lot of the growth seen throughout 2021 was primarily thanks to rising metal prices from surging demand in the automotive and renewable energy industries. But with other mining businesses trying to capitalise on the opportunity, the market might become saturated in the future.

Suppose that were to happen? In that case, metal prices would fall, taking out Anglo Pacific’s profits in the process with little recourse for management available. Needless to say, that would not be good news for its UK shares.

Personally, I think this is a risk worth taking. Vanadium and cobalt are pretty hard to come by, which gives Anglo Pacific a bit more protection from potential oversupply. Plus, with many countries aiming to go green within the next decade, I don’t see demand for these materials disappearing any time soon.

Therefore, to me, this looks like a fantastic buying opportunity for my portfolio.

• Many growth shares have suffered double-digit declines making them look relatively cheap.
• The convenience store market size is £44.3bn, which one rising FinTech stock is capitalising on.
• The surging demand for battery metals is sending cobalt prices through the roof, leading to record-breaking revenue for a UK mining business.

It’s a time of increased volatility in the stock market. While the FTSE 100 has delivered relatively strong results in recent months, not all stocks have been blessed with the privilege. But in my experience, volatility breeds opportunity. And with that in mind, let’s explore two UK shares I think are looking rather cheap.

A rising FinTech star

One stock that’s had a bit of a rocky journey in recent months is PayPoint (LSE:PAY). The business is a payments and e-commerce solutions provider for convenience store owners. Historically, the group has been highly dependent on cash transactions, which proved problematic when the pandemic struck, and everyone turned to contactless payments.

But PayPoint has now changed tactics, making several acquisitions to reposition the business to become a new leader in digital payments. And looking at the latest results, it seems this new strategy is working. In its third quarter of 2022, ended in December, total revenue came in 21.3% higher than a year ago, putting an end to its long record of stagnant growth.

Acquisitions obviously have their risks. If a target company fails to deliver on expected performance, or complications arise when integrating operations, it can end up destroying shareholder value rather than creating it.

Nevertheless, I remain cautiously optimistic. And with a PE ratio of around 20 versus the £44.3bn market opportunity, the UK share is looking relatively cheap to me.

A cheap UK mining share focusing on battery metals

Inflation may be wreaking havoc on most businesses. But for the mining sector, rising commodity prices are helping to significantly expand profit margins. And the increasing price effect is only amplified for metals related to electric vehicles and renewable energy technology, thanks to surging demand.

This is lovely news for Anglo Pacific Group (LSE:APF). The royalties company has historically been dependent on the sale of thermal coal to drive its bottom line. But over the years, management has begun diversifying the portfolio toward battery metals. Its recent $205m (£152m) acquisition of a cobalt mine royalty is proof of that.

And, so far, this strategy is paying off. Because when looking at the latest quarterly results, portfolio revenue climbed 74% to a record-breaking $23.6m (£17.5m). A lot of this growth can be attributable to price inflation, due to supply chain disruptions. And therefore there is a risk of prices falling again once these disruptions are resolved.

But with demand for battery metals unlikely to disappear any time soon, I think Anglo Pacific could be in for a good run. And with shares still trading below pre-pandemic levels, despite its superior financial position, I believe UK stock is looking rather cheap.

Rupert Hargreaves: Impact Healthcare REIT

Impact Healthcare REIT (LSE: IHR) focuses on buying healthcare properties in the UK. The properties are usually leased on long-term contracts with annual inflation uplifts. The firm has expanded its portfolio by around 150% over the past few years.

Thanks to this business model, Impact Healthcare has become an income champion. The stock currently yields 4.4%, and analysts expect the yield to hit 5.5% in 2022. I would buy the shares for my portfolio for these reasons.

Some challenges the firm may face include higher interest rates, which could reduce the amount of cash value for distribution to investors.

Rupert Hargreaves does not own shares in Impact Healthcare REIT.

Zaven Boyrazian: Anglo Pacific Group

Anglo Pacific Group (LSE:APF) is a royalties business that finances the development of mining sites of other companies. In exchange, it receives a portion of the materials extracted from the earth.

The firm has a stake in eight producing mines worldwide and another seven in early-stage development. Combined, they supply nine different metals, including cobalt and vanadium, which are key ingredients for electric vehicle batteries.

While the company is exposed to the risk of fluctuating commodity prices, it is currently yielding 6.5%. That’s why I think now is an excellent time to increase my position in this dividend stock!

Zaven Boyrazian owns shares in Anglo Pacific Group

Paul Summers: Somero Enterprises

At the risk of sounding like a stuck record, my top dividend stock for January – and one of my picks for 2022 – is Somero Enterprises (LSE: SOM). Offering a near-6% dividend in FY22, this quality AIM-listed company is doing exceedingly well as the infrastructure boom in the US continues. Somero manufactures laser-guided equipment to check that concrete flooring in warehouses is completely flat. 

Clearly, recent momentum could be lost in the event of a serious wobble in the global economy. At a little less than 13 times forecast earnings, however, the valuation still looks reasonable to me for the income on offer.

Paul Summers owns shares in Somero Enterprises

Ed Sheldon: Legal & General Group

My top British dividend stock for January is Legal & General Group (LSE: LGEN). It’s a financial services company that specialises in insurance, investment management, and retirement solutions.

Legal & General has put together a solid dividend growth track record over the last decade. For 2020, it paid out dividends of 17.6p per share, up from 13.4p for 2015. For 2021, the total dividend is expected to amount to 18.4p. At the current share price, that equates to a very attractive yield of 6%.

One risk to consider here is that share price volatility can be elevated at times. This can impact overall returns. I think the key is to forget about the volatility and focus on the big dividend payments, however.

Edward Sheldon owns shares in Legal & General Group.

Royston Wild: ContourGlobal  

ContourGlobal (LSE: GLO) constructs, acquires and runs power stations all over the world. And at current prices it’s one of the highest-yielding shares on the FTSE 250. A reading of 7.6% for 2022 beats the index’s broader 2% average by a massive margin too. 

Concerns over central bank rate hikes and their impact on the global economy are significant. This has the potential to drive up debt costs at ContourGlobal. But unlike most UK shares, such monetary tightening shouldn’t stop this FTSE 250 business generating big profits, in my opinion. The critical nature of ContourGlobal’s services should see to that. So I think this is a top dividend stock for these uncertain times. 

Royston Wild does not own shares in ContourGlobal.

G A Chester: Polymetal International 

Gold and silver miner Polymetal (LSE: POLY) has a high-quality portfolio of producing, development and exploration assets in Russia and Kazakhstan. It’s a FTSE 100 company, and a top-10 global gold producer and top-five global silver producer. 

Operational setbacks can be a risk with miners, but I think Polymetal’s nine producing mines mitigate the risk by reducing the adverse impact of a problem at any one. 

I’m expecting a fourth-quarter production report later this month to underpin an analyst’s consensus forecast that gives the dividend stock a P/E of around eight and a generous yield of near to 8%. 

G A Chester has no position in Polymetal International.

Roland Head: Ibstock

FTSE 250 firm Ibstock (LST: IBST) is one of the UK’s largest manufacturers of bricks and concrete building products. The company’s products are used by housebuilders, in commercial buildings and on the railway network.

Ibstock’s business has recovered from the pandemic, but its share price remains nearly 40% lower than at the end of 2019. At this level, the shares offer an attractive forecast dividend yield of 4.2% for 2022.

The main risk I can see for this dividend stock is that a downturn in the construction market could hit demand. However, management say demand remains strong. Ibstock is on my shopping list.

Roland Head does not own shares in Ibstock.

Christopher Ruane: Diversified Energy

Double-digit percentage yields are unusual, but one is offered by Diversified Energy (LSE: DEC).

The company owns over 60,000 oil and gas wells spread throughout the Appalachian region of the US. The sheer number of wells gives the dividend stock critical mass, even though many of them individually are fairly small. That enables it to generate substantial cash flows. The company pays dividends quarterly and currently yields over 10%. One risk, though, is the future cost of capping old wells. That could eat into profits.

Christopher Ruane owns shares in Diversified Energy.