Legal & General Group

Legal & General Group (LSE: LGEN) has a great opportunity to benefit from Britain’s rapidly ageing population.

It must paddle hard given the ultra-competitive market in which it operates. But its expertise across fields such as pensions and wealth management could help it to thrive as retirement planning becomes more common.

Legal & General is a true industry giant. It generated pre-tax profit of £1.2bn in the first half of 2022. And, pleasingly for dividend investors, it generates huge amounts of cash with which to pay market-beating dividends.

For 2022, the company carries an 8.6% dividend yield. It also trades on a forward price-to-earnings (P/E) ratio of 6.5 times, making it a great all-round value stock to buy.

Ibstock

Brickmaker Ibstock (LSE: IBST) is a dividend share I already own. And following recent trading details I’m tempted to buy more.

On Tuesday, it said that “robust demand patterns” for its products persisted during the third quarter. As a consequence, trading for the period came in above its expectations.

Higher interest rates pose a threat to the business. Demand for its brick and concrete products could be hit if the housing market suffers a shock. This in turn could damage the passive income I receive.

But from a long-term view, I think Ibstock’s market outlook remains rock solid. And this is why I’d buy more of its shares today. Britain’s colossal housing shortage means home construction rates should rise sharply in the years ahead.

On top of this, brick sales will likely be supported by a strong repair, maintenance and improvement (RMI) market. Renovation activity should remain strong due to the high average age of the UK’s housing stock.

Today, Ibstock carries a decent 6% dividend yield. It also trades on a forward P/E ratio of 8.2 times.

Bank of Georgia Group

Demand for financial products is soaring in certain Eurasian markets. This makes Bank of Georgia Group (LSE: BGEO) another FTSE 250 stock I’d buy for long-term income.

Far-flung Georgia hasn’t been an attractive destination for banking stock investors historically. However, steady reform of the country’s financial industry make it a much more attractive place to invest today.

Meanwhile, the likes of Bank of Georgia continue to enjoy surging revenues as the domestic economy rapidly grows. Pre-tax profit here jumped 39% year on year during the six months to June.

Economic growth in Georgia could suffer in the event of a long Ukraine-Russia war. But this is a risk I think is more than reflected in Bank of Georgia’s rock-bottom valuation.

The firm trades on a forward P/E ratio of 3.5 times right now. Meanwhile, its 2022 dividend yield sits at an enormous 7.6%.

Just picking shares with a high dividend yield, and then holding indefinitely, is not always a winning strategy. There are times when a company may begin to suffer in the market, meaning that all passive income is offset by capital losses on the investment.

For that reason, when looking for a dividend share to generate income, I like to focus on simple yet high-quality companies. I often think of a good company as one that generates plenty of free cash flow, has low debt, and has steady earnings growth. These may not be the most exciting investments and are unlikely to generate huge returns, although are often the perfect way to access a reliable dividend.

I have found that Ibstock (LSE: IBST) is probably a prime example of a simple company, with the right fundamentals and, importantly, a high dividend yield of 4.1%.

I think it’s fair to say that the company fulfils the non-exciting criteria, being a manufacturer of clay and concrete products, such as bricks, roof tiles, and fencing. That being said, a straightforward business like this is exactly where I would look to find a great dividend earner, and I think that may well be the case with Ibstock.

The company has strong underlying fundamentals, with consistent earnings, a sensible profit margin, relatively low levels of borrowing, and plenty of positive cash flow. Furthermore, Ibstock has a dividend cover of 1.8, indicating that it can afford to pay its dividend almost twice, with current earnings. This is a good sign, as I would look for companies that can comfortably afford to pay its dividend, as this reduces the risk of it cutting the dividend in the future.

Despite these positive aspects of the company, Ibstock’s share price has not performed particularly well over the last two years. It’s down 9.8% in 2022, and just over 40% from pre-pandemic levels. The company outlined in its latest interim results that industry-wide inflation, and supply chain issues, have impacted profit and cash generation. This would go some way to explaining the recent underperformance, although I am encouraged by management’s comments that Ibstock is making good progress towards its performance targets and focusing on costs.

For reasons discussed previously, it’s important to assess whether any high-dividend company has the underlying performance to generate consistent income. In my opinion, Ibstock’s fundamentals are strong and are likely to allow consistent dividend payments going forward. Furthermore, the current yield of 4.1% is appealing as an income generator, especially given the forecast of this increasing to 4.8% in the following year.  I would therefore consider adding this simple yet high-quality company to my portfolio, for future passive income.

Dividends of brick and mortar

The shares in Ibstock (LSE:IBST) are up 8.4% in the past year and, at the time of writing, they’re trading at 191p.

For 2021, the construction materials manufacturer paid a total dividend of 7.5p. At current levels, this equates to a dividend yield of 3.93%.

In May, the firm also announced that it would be embarking on a £30m share buyback scheme. This is simply one way for the business to return profits to shareholders and, therefore, an additional way to derive income.

For the six months to 30 June, revenue increased 28% to £259m. Furthermore, underlying cash profit rose by 29%, coming in at £71m.

I’m always aware, though, that this growth is not guaranteed in the future.

These recent results, together with the share buyback scheme, are an indication that the company is in a solid financial state.

However, there is the real threat that the cost of raw materials needed for Ibstock’s products rises. This could result in shrinking profit margins. 

Despite this, the business increased its interim dividend by 32% to 3.3p.

Feeding my income stream

Second, the Bakkavor (LSE:BAKK) share price has fallen 10.5% in the last month and the shares are trading at 85p at the time of writing.

In 2021, the producer of fresh prepared foods paid a dividend of 6.6p, equivalent to a yield of 4.66%. As an investor looking for high dividends, I find this very attractive.

It’s important to note, however, that dividend policies may be subject to change at some point in the future.

For the 13 weeks to 26 March, revenue increased by 11.5%, to a total of £485.4m. In addition, the business stated that it had £180m of liquidity.

However, given Bakkavor’s global presence, it’s still suffering in regions where lockdowns are common, especially China. This means that results are still being stifled by pandemic-related issues. 

Nevertheless, the strong liquidity indicates that the firm may be able to make it through any short-term difficulties.

Furthermore, it still expects full-year results to be in line with expectations. This gives me confidence that weaknesses in different global segments may soon subside.

Overall, these companies boast attractive dividend yields. While there are challenges for both firms, I’m quite confident that they may overcome these in the near future. As such, I’ll add these businesses to my portfolio soon, in anticipation of potential future income through dividends, while exposing myself to consistent growth.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Scottish Mortgage Investment Trust 

What it does: Scottish Mortgage invests in a global portfolio of companies through a mix of listed and unlisted shares.  

By Charlie Keough. My top British stock for August is Scottish Mortgage Investment Trust (LSE: SMT). I’ve long been a fan of this equity. And with its share price taking a hit this year, I think this offers a great time for me to buy. 

The management team aims for growth over a five-year period. And while past performance is no guarantee of future returns, the last five years have seen the trust return around 100% to shareholders.  

Scottish Mortgage has suffered this year due to its focus on growth stocks. While these may continue to stall in the near run, over a more extended period I think the trust has the potential to provide me with some substantial returns (like it did when buying Tesla in 2013). 

Ongoing struggles in China, along with the likely potential of inflation continuing to dampen investor confidence, could see the stock slip. However, I’d buy the stock in August as a long-term hold.  

Charlie Keough does not own shares in Scottish Mortgage Investment Trust. 

Premier Foods 

What it does: Premier Foods manufactures a broad range of foods and ingredients like cakes, custard, cooking sauces and gravy.

By Royston Wild. Purchasing shares in food producers like Premier Foods (LSE: PFD) has traditionally been a popular play for investors during tough economic times. Food is one thing that people don’t stop spending on when times get tough. 

But businesses like this aren’t risk-free at the moment. Spending is plummeting at an alarming rate as the cost-of-living crisis worsens. The Office for National Statistics says that 50% of Brits are buying less food when doing the food shop. 

But in this climate I’m encouraged by how resilient trading at Premier Foods has remained. Revenues here rose 6% in the 13 weeks to 2 July, meaning the business remains on track to meet full-year expectations. 

I like Premier Foods because it sells food at the value end of the market under brands like Batchelors. Furthermore, I appreciate the excellent brand power of products like Mr Kipling cakes and Homepride cooking sauces. Volumes of beloved labels like these tend to remain more stable during downturns.

Premier Foods trades on a forward P/E ratio of just 10.2 times. I think this makes it a top value stock to buy in August. 

Royston Wild does not own shares in Premier Foods. 

Experian

What it does: Experian is a British technology company that specialises in consumer credit data.

By Edward Sheldon, CFA. FTSE 100 company Experian (LSE: EXPN) has seen its stock price pull back in 2022 and I think this has provided an attractive buying opportunity in August.

A trading update posted in mid-July showed that the company has momentum at present. For the three-month period to 30 June, total revenue was up 7% year on year. Meanwhile, looking ahead, the company said that it expects total revenue growth of 8-10% for the year ending 31 March 2023.

As for the stock’s valuation, it seems quite reasonable to my mind. With analysts currently expecting the group to generate earnings per share of around $1.36 this year, the P/E ratio here is around 25. I don’t see that as excessive given Experian’s market dominance, growth rate, and high level of profitability.

Of course, if the tech sector continues to experience weakness, Experian shares could underperform in the near term. Taking a long-term view, however, I see the risk/reward profile here as attractive.

Edward Sheldon owns shares in Experian.

International Consolidated Airlines Group

What it does: This company is an airline conglomerate that operates across the entire globe. It owns a number of well-known airlines, including British Airways, Aer Lingus, and Iberia.

By Andrew Woods. International Consolidated Airlines Group (LSE:IAG) was battered as the pandemic made its way around the world. This was primarily because countries shut their borders and virtually all commercial flights were grounded.

The result was that IAG swung to a €7.8bn pre-tax loss in 2020 as its income sources became ever more limited. This forced the firm to issue new shares to raise capital in the midst of the crisis.

In 2021, however, pre-tax losses more than halved to €3.5bn. During an update for the first three months of 2022, it stated that it may even return to profitability in the middle of this year. In those first three months, revenue climbed to €3.4bn compared to €963m for the same period in 2021.

Although passenger capacity is improving, recent cancellations due to staff shortages could delay progress. Nevertheless, I think August may reveal that IAG has once again hit calmer skies and I’ll be adding more shares if it does.

Andrew Woods owns shares in IAG.

Fresnillo 

What it does: Fresnillo is the world’s largest primary silver producer and Mexico’s largest gold producer, with seven operating mines. 

By G A Chester. Fresnillo (LSE: FRES) has been through a difficult few years. Covid disrupted its operations quite severely at times. And the introduction of new labour legislation last September also presented challenges. 

However, management recently reported a solid second quarter of production in line with its expectations. It said this was despite some continued impact from the pandemic. 

The company’s also made good progress in adapting to the Mexico labour reform. This required it to internalise a high proportion of its contractor workforce. It said its recruitment and training campaigns are proving effective and that it should complete the process by the end of the year in its underground mines. Meanwhile, it said its open pit mines are now fully staffed. 

With operations normalising, a Covid-delayed major growth project ready to ramp-up, and a good pipeline of further development projects and exploration prospects, I think Fresnillo is ripe for a recovery. 

G A Chester does not own shares in Fresnillo. 

Ibstock

What it does: Ibstock is the UK’s leading manufacturer of clay bricks and concrete products used by the construction industry.

By Zaven Boyrazian. The property market is notoriously cyclical. And with the Help-To-Buy scheme coming to an end soon, it’s possible for a downturn to be arriving soon. However, when it comes to long-term demand, the need for housing isn’t going anywhere. And that’s terrific news for my top stock to buy for August, Ibstock (LSE:IBST).

The brick manufacturer has suffered quite a few disruptions from Covid-19. However, those woes seem to be in the past and business has begun to ramp up again.

Its latest interim results demonstrated double digit growth for revenue and profits thanks to an uptick in sales volumes. Meanwhile construction for its new Atlas and Aldridge redevelopments continue to be on track for completion for the end of 2023.

Once brought on-line, these facilities will expand the firm’s manufacturing capacity by 115 million bricks per year. And given Brexit has made importing bricks far more expensive, the firm may be in a prime position to capitalise on the opportunity.

Zaven Boyrazian does not own shares in Ibstock.

Moneysupermarket.com

What it does: Moneysupermarket.com operates price-comparison sites for money, home services, money, insurance and other products

By Paul Summers: I’ve been banging the drum on Moneysupermarket.com (LSE: MONY) for some time now. Unfortunately for me, other investors haven’t agreed with my bullish view and the share price is still down 18% in the last year. The inability of consumers to switch energy suppliers hasn’t exactly helped.

Despite this, I’m in no mind to sell my holding. Quite the opposite.

Earlier this month, the company stated that revenue had grown 19% over the first six months of 2022. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 10%, which was ahead of expectations. The interim dividend was maintained too.

With consumers trying to save money where they can, I think this positive momentum can continue. At just below 16 times earnings as I type, the stock still trades at an attractive valuation and there’s a 5.7% yield in the offing if the full-year payout is kept steady.

Paul Summers owns shares in Moneysupermarket.com

Airtel Africa

What it does: Airtel Africa is a leading operator of telecoms networks and mobile money services in Africa.

By Roland Head. Shares in Airtel Africa (LSE: AAF) have doubled since the company floated on the London Stock Exchange three years ago. I think further gains are likely.

Recent first-quarter results showed revenue up by 13% to $1,257m during the three months to 30 June. This growth was mainly due to a 25% increase in mobile money revenue and a 20% rise in data revenue.

Many African countries lack the formal banking networks and fixed-line telecoms services we take for granted. I think that demand for internet and financial services will continue to be driven by rising mobile usage.

One possible risk is that Airtel Africa carries a fair amount of debt — $3,056m at the last count. However, debt is falling, and cash generation is strong.

Airtel shares trade on 11 times forecast earnings, with a 3% dividend yield. I see the stock as a long-term buy in August at this level.

Roland Head owns shares in Airtel Africa.

Compass Group 

What it does: Compass Group is a FTSE 100 global leader that runs workplace canteens for thousands of organisations across 44 countries.  

By Harshil Patel. Given soaring food prices, some might be surprised that I think it’s a good idea to buy food services provider Compass Group (LSE:CPG). But it’s rising food and energy costs that are pushing more organisations to outsource this function.  

As a specialist in the field, Compass has a better chance to provide catering functions at lower cost and greater flexibility. 

Compass says that it’s winning new business. And that has helped it to raise its sales growth predictions for the second time this year. I reckon it’s a trend that could continue into next year.  

Whereas finding the right staff is a challenge plaguing many organisations right now, Compass seems to be managing relatively well.  

Now, as it’s a physical business, any further pandemic-related disruptions could affect earnings. However, all things considered, I’m banking on its strong cash flow, earnings growth and dividend growth to provide me with solid shareholder returns. 

Harshil Patel does not own shares in Compass Group. 

1. Resilient long-term demand

Like humans, buildings have a lifespan. Not many are around for centuries and some last barely a few decades before being torn down and replaced. Although the variety of building materials today is broad, bricks remain essential for the building trade. The UK gets through a couple of billion bricks a year. But their weight means it can be more economical to buy locally than import them from far away.

That adds up to a pretty attractive sector in my view. A local manufacturer has an inbuilt advantage and customer demand remains high centuries after the industry began. On top of that, when was the last time you saw a brick you thought was new and different? Possibly never! Even without spending on new product research and development, the industry is able to benefit from strong customer demand.

But demand, while resilient, is still subject to market forces. If a worsening economy leads to fewer new building projects, revenues at brick makers like Ibstock could fall.

2. Ibstock has an attractive competitive advantage

Billionaire investor Warren Buffett talks about a company having a moat that helps fend off competitive attack, just as happened at medieval castles. That can help give it pricing power, which is good for profit margins.

I think Ibstock has such a moat, in the form of its network of clay mines. It is almost two centuries since the first mine shaft was sunk in the town after which the town is named. Today, Ibstock is the UK’s leading manufacturer of bricks. That process relies on clay or shale. The company owns 18 active quarries, with around 72m tonnes of proven freehold clay reserves. On top of that, it has long leases on other clay quarries.

This exclusive access to reliable sources of clay gives the firm a strong long-term competitive advantage in my view. It makes it easier for Ibstock to control costs than if it relied on buying in its clay from a third party. That said, it does also add the risk of ongoing maintenance costs even if a dip in market demand means some quarries have to be mothballed.

3. Ibstock shares have a 4.2% dividend yield

At the moment, the dividend yield on Ibstock shares means I would consider them for my portfolio as an income pick. At 4.2%, it is far from the highest yield in the market. But I do find it attractive enough to consider buying the shares as part of a diversified portfolio.

The dividend is still less than half of what it was before the pandemic. That illustrates that another demand shock could lead to a dividend cut. Then again, if the company continues to do well, I also see potential for future dividend growth.

Braemar Shipping Services

What it does: Provides chartering, risk management, and investment advice to the shipping industry.

Commercial transport stocks like Braemar Shipping Services (LSE: BMS) face huge uncertainty as the global economy cools. In days gone by, falling trade and lower demand for their services would play havoc with their shipping rates.

This is still a threat as inflation worsens and key economic indicators slump. But due to a supply imbalance in the shipping market I’m confident businesses like this will remain solid investments.

Weak shipbuilding activity over the past decade has created a dearth of available vessels. And due to labour shortages shipyards can’t get enough boats out to meet demand.

Healthy dividend growth

So while shipping rates are trending lower of late, business conditions remain extremely favourable for the likes of Braemar. Indeed, City analysts expect annual earnings to rise 24% in the year to February 2023.

It’s a forecast that leaves Braemar trading on a rock-bottom price-to-earnings growth (PEG) ratio of 0.5. Investing theory says that a reading below 1 share is undervalued.

It also means analysts predict healthy dividend growth. An expected 7p per share dividend for financial 2022 is predicted to rise to 8.5p this year. Consequently the shipping giant carries a 3.3% dividend yield.

Finally, this year’s expected dividend payment is covered 2.7 times by anticipated earnings. Any reading above two times provides a good level of protection for investors.

So Braemar should be in a strong position to make this year’s dividend forecast even if the shipping rates worsen.

Ibstock

What it does: Manufactures a wide range of standard and specialised bricks and cladding.

Britain will need to turbocharge housebuilding over the next decade to meet the needs of a growing population. So I expect brickmaker Ibstock (LSE: IBST) to witness booming long-term demand. It’s why I’ve invested in this FTSE 250 stock myself.

The fact that house prices continue surging despite the worsening economy illustrates how depleted the UK’s housing stock is. Latest Halifax data in fact showed average home prices rising at their fastest pace for 14 years. And it’s why City analysts think Ibstock’s earnings will rise 22% year on year in 2022.

A high dividend stock

Unfortunately supply chain problems in the construction industry are prompting some housebuilders (like Persimmon) to reduce their production targets. If this problem persists it could have a significant knock-on effect for Ibstock’s sales.

Still, in my opinion, this is reflected in the company’s low price. Like Braemar, Ibstock shares trade on a PEG ratio of just 0.5.

I also like this dividend share because of its solid dividend yields. A predicted 8.9p per share dividend for 2022 yields a meaty 5%. That’s up from 7.5p last year.

And what’s more, Ibstock’s dividend cover sits around the safety benchmark of two times.

That’s not to say that utilities firms are without risk. This particular FTSE 100 business fell this week as Ofwat announced it was expanding an investigation into the dumping of sewage into rivers.

Okay, the regulator’s probe hasn’t currently got United Utilities in the crosshairs, announcing South West Water will be investigated. However, there is some concern other operators could be pulled in and subjected to huge fines.

No share is without risk, of course. And in the case of United Utilities I think the benefits of owning the business outweigh the dangers. Ultra-defensive stocks like these are worth their weight in gold at times like these.

Oh, and today the company’s forward dividend yield sits at a fatty 4.4%.

Housing hero

Springfield Properties (LSE: SPR) offers the sort of all-round value that also makes it a top buy for July. For this financial year, its dividend yield sits at an excellent 5.2%. And on top of this the housebuilder trades on a forward price-to-earnings (P/E) ratio of just 6.7 times.

Any investor in Springfield needs to consider the impact that Bank of England (BoE) rate rises will have on future profits. Accelerating inflation means rates could keep increasing rapidly in what could be a blow to homebuyer demand.

However, I believe this threat is more than reflected in the Scottish homebuilder’s ultra-low valuation. It’s also my opinion that sales of newbuild properties will remain rock-solid as historically-low mortgage rates — helped by intense competition among Britain’s lenders — appear here to stay.

I also believe the end of Help to Buy next March won’t be a catastrophe for housing stocks like Springfield. New government schemes to keep buyer deposits on the low side has already been launched. Besides, potential homeowners can still use a Lifetime ISA, a product that provides the same advantages as Help to Buy.

Brick bonanza

Ibstock (LSE: IBST) is a big-yielding dividend stock I already own. I’m tempted to buy more in July too, given its exceptional all-round value.

Ibstock makes bricks so, like Springfield, it’s also vulnerable by BoE rate rises. A cooling housing market will naturally hit demand for its product. What’s more, it takes a lot of energy to make a brick so the business is under threat from soaring energy costs.

Still, it’s my opinion that the benefits of owning this FTSE 250 share offset the dangers. Britain will need to get building frantically over the next decade and more to meet demand. The National Housing Federation thinks 340,000 new homes are needed each year in England alone.

Ibstock is obviously well-placed to exploit this massive market opportunity. Yet I don’t think this is reflected by the company’s low share price. Today, it trades on a forward P/E ratio of 10.2 times. It also carries a 5.2% dividend yield at current prices.

Home comforts

Many of Britain’s housebuilders like Vistry Group (LSE: VTY) have fallen sharply since the beginning of 2022. It’s a decline that seems to be at odds with a stream of positive updates on the state of the housing market. Latest Office for National Statistics data this week, for instance, showed property prices rose an extra 9.6% year-on-year in January.

The market is nervous that interest rates could hit demand for newbuilds created by Vistry and its peers. With inflation soaring, it’s certainly possible that the Bank of England could ramp up monetary tightening in the months ahead. And this might hit buyer affordability hard.

This is a risk I believe is baked into Vistry’s share price today however. Today, the FTSE 250 share trades on a forward price-to-earnings (P/E) ratio of just 7 times, a reading that sits well inside bargain basement terrain of 10 times and below.

7.6% dividend yields

I actually reckon Vistry’s sales will remain strong, owing to a lack of existing properties entering the market today. At the same time, intense competition among mortgage providers is heating up and government support from first-time buyers through Help to Buy remains in play.

I’m confident that other support for new homebuyers (like the mortgage guarantee scheme requiring just a 5% deposit) will significantly offset the withdrawal of Help to Buy next year too, and support robust sales of newly-constructed homes.

One further point about Vistry. The builder doesn’t just offer excellent value from an earnings perspective. Its 7.6% dividend yield for 2022 smashes the 2.6% FTSE 100 average.

With predicted dividends covered a healthy 1.9 times by anticipated earnings — and the company’s balance sheet recovering strongly (it had £234.5m worth of net cash as of December — I think Vistry’s in great shape to make good on these predictions too.

Another FTSE 250 bargain

A bright outlook for the homes market is also making me pay close attention to Ibstock (LSE: IBST). Like Vistry, this FTSE 250 share has also slipped sharply in value in recent months and, as an existing shareholder, I’m thinking of using this as a classic dip-buying opportunity.

You see Ibstock makes the bricks that are essential to help solve the chronic shortage of new homes. The government is looking to build 300,000 new residential properties every year and this building materials provider plans to supercharge capacity to let it exploit this upcoming building boom to the max.

Recent share price weakness means that Ibstock trades on a forward P/E ratio of just 10.8 times. It also sports a mighty 4.8% dividend yield, with expected payouts covered a healthy 1.9 times by anticipated earnings too.

I’d buy the FTSE 250 business even though possible problems with building its new factory could hit medium-term profits.

With shares falling dramatically, dividend yields are on the rise. There are undoubtedly plenty of companies ravaged by the pandemic and will likely be unable to sustain their now high yield.

But I’ve spotted two dividend-paying businesses that could be excellent additions to my passive income portfolio. Let’s explore.

Investing in housing with UK shares

Persimmon (LSE:PSN) is one of the UK’s most prominent home builders. But its share price hasn’t performed all that well. Despite property prices rising and demand for housing still at an all-time high, the stock is down 13% over the last 12 months. So it’s hardly surprising that the dividend yield now stands at a whopping 9.5%!

However, as a long-term investor, the question is can this payout be sustained? Looking at the latest trading update, I believe it can. Home completions in 2021 increased by 7% year-on-year to 14,551. That’s still behind pre-pandemic construction levels of 15,885, but it’s moving in the right direction.

Meanwhile, total revenue has almost fully recovered, thanks to average selling prices jumping from £215,709 in 2019 to £237,050 in 2021. This is actually why the UK share brought back its massive 235p dividend per share payout. And with supply chain issues slowly being resolved, home completions could quickly recover, sending revenues up to new records in 2022.

Of course, there are some looming threats on the horizon. First-time buyer and other government support schemes are coming to an end in March next year, which could dent affordability. This may be enough to send property prices in the wrong direction, potentially compromising the dividend yield.

But over the long term, I don’t see housing demand disappearing, especially with a rapidly expanding population. That’s why this could be one of the best UK shares to add to my dividend portfolio.

A business with a solid dividend future?

In a pre-pandemic world, Ibstock (LSE:IBST) offered a pretty hefty dividend yield. However, with construction projects having ground to a halt in 2020, it’s not surprising the brickmaker had to temporarily cancel its dividends. Consequently, shares of this UK business crashed by 50% in March 2020 and still hasn’t fully recovered.

But despite it currently trading below 2021 levels, the business seems to be in a far stronger position. Looking at the latest trading update, revenue for 2021 is expected to have made a full recovery to £409m – the same as in 2019. And according to management, EBITDA is also anticipated to be ahead of expectations.

Dividends have since been reinstated, albeit at a reduced yield of 2%. However, with manufacturing capacity set to expand later this year, revenues, profits and, in turn, dividends could be on the verge of hitting new highs. That, to me, sounds like a buying opportunity.

There are obviously risks to consider. Being a purveyor of construction materials, demand for its products are ultimately tied with the demand for new homes. If housing affordability were to suffer, the number of newbuilds could drop, undercutting future dividend income.

Yet, despite this risk, I believe this stock could be set to make an impressive comeback. That’s why I’m considering it for my portfolio.

The UK share profiting from inflation

Inflation is obviously bad news for consumers. After all, the rising cost of living doesn’t exactly help protect or build wealth. But in the case of banking, this is actually fantastic news. Why? Because when inflation is on the rise, the Bank of England can and is raising interest rates to counter this effect. Consequently, banks like Lloyds (LSE:LLOY) can start charging higher interest on the loans they issue to businesses and individuals alike.

While it’s a bit more complicated than that in practice, the end result is increased profit margins on all lending activity. And since Lloyds generates nearly 75% of its gross income through issuing loans like mortgages, this could mean its bottom line is about to seriously expand.

This is not guaranteed, of course. There are still many companies limping on with the ongoing devastation of the pandemic. And it’s possible the increase in interest rates could lead to a rise in defaults. Needless to say, that could quickly eliminate the benefit of the wider margins, sending the UK share plummeting in the process.

Despite this risk, I think the favourable change in the lending environment could yield a lot of rewards for my portfolio. Hence why I believe this stock is a no-brainer investment. But it’s not the only one on my radar.

More bricks are needed

Ibstock (LSE:IBST) hasn’t had the best of runs lately. With the pandemic causing building projects to be delayed, the brickmaker saw revenues plummet by double-digits in 2020 — falling by nearly 25%.

Since then, the situation has improved. In the latest earnings report, management stated demand for its construction materials is on the rise. And that’s despite the price inflation of clay caused by the supply chain disruptions. This means management was successfully able to pass on this cost to customers.

Consequently, total sales for the whole of 2021 are expected to be around £409m. That’s 29% higher versus 2020 and is in line with pre-pandemic levels.

There are still some unknowns surrounding this business. Shortages of HGV drivers continue to pose potential problems when delivering products to a construction site. Meanwhile, if the housing market starts to slow due to rising interest rates, it could reduce buying activity. This would subsequently lead to fewer construction projects, which in turn, would lead to a drop in demand for Ibstock’s products.

That would obviously be bad news for the share price of this UK business. But over the long term, I don’t think the demand for housing is likely to disappear. Therefore I believe this is a risk worth taking for my portfolio.