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Urban Logistics REIT 

What it does: Urban Logistics REIT owns and operates more than 100 warehouses single-occupant designed for ‘last mile’ delivery.

By Royston Wild. Recent panic selling of UK assets has pushed prices of many top property stocks sharply lower. As a result, I believe Urban Logistics REIT (LSE: SHED) is an attractive buy for investors this November. 

At current prices, the FTSE 250 firm’s dividend yields for the next two financial years sit at an enormous 6.1% and 6.5% respectively. 

Property shares often provide investors with solid protection against high inflation. This is because they are usually able to raise rents in order to eliminate (or at least offset) increasing cost pressures.  

With UK inflation at 40-year highs and tipped to go higher, Urban Logistics could therefore be an effective wealth preserver. 

I wouldn’t just buy this REIT for the here and now, however. I’m expecting earnings (and consequently dividends) to grow strongly over the next decade as e-commerce steadily expands. 

Demand for the warehouses and distribution properties it owns appear on course to improve rapidly. And rents will likely stride higher given the weak construction outlook for this particular sector.

Royston Wild does not own shares in Urban Logistics REIT. 

LondonMetric Property

What it does: LondonMetric property is an urban logistics real estate manager with 17 million square feet in its asset portfolio.

By Zaven Boyrazian. LondonMetric Property (LSE:LMP) has been on a roll lately. Despite what the 33% drop in share price would suggest, the urban logistics property manager is seemingly thriving. In fact, as of October this year, occupancy stands at an impressive 99%, with an average lease term of 12 years among its tenants.

Even with e-commerce slowing on the back of reduced consumer spending, demand for urban logistics centres continues to grow – a trend management seems to be capitalising on successfully. As such, the stock offers an impressive 5.5% dividend yield.

With interest rates rising, real estate investment trusts like Londonmetric Property have been hit hard due to their high debt balances. But a closer look at the company’s loans reveals that 80% of its debts are either hedged or on a fixed rate.

In other words, the threat of rising interest rates to this business may not be as disastrous as many think. And that’s why I believe a buying opportunity in this stock has emerged for me.

Zaven Boyrazian does not own shares in LondonMetric Property.

Diversified Energy Company

What it does: Diversified Energy Company owns and operates around 67,000 mature natural gas and oil wells in the US.

By Charlie Carman. Diversified Energy Company (LSE: DEC) shares have climbed nearly 17% this year. The FTSE 250 stock offers a handsome 11% dividend yield.

A key reason I’m bullish is President Biden’s drive for American energy independence. As a domestic producer, the firm should benefit from White House policies designed to combat spiralling commodity prices fuelled by the Russo-Ukrainian war and OPEC+ production cuts.

In addition, I’m encouraged by the company’s recent share buyback scheme to capitalise on sterling’s weakness against the dollar.

Admittedly, DEC posted a $935m net loss in H1 2022, which concerns me. I’m also sceptical about the accounting accuracy of decommissioning liabilities, which assumes its old wells will survive until 2095.

Nonetheless, the business model looks healthy overall. In particular, I like the robust 22% free cash flow yield that underpins DEC’s market-leading dividend. With supportive government policies acting as a tailwind for the foreseeable future, I’d buy this stock in November.

Charlie Carman does not have a position in Diversified Energy Company. 

DS Smith

What it does: DS Smith provides sustainable packaging solutions, paper products and recycling services worldwide.

By Kevin Godbold: Despite all the gloomy economic news around, DS Smith (LSE: SMDS) issued an upbeat trading statement on 10 October.

The company reported “good and consistent” trading. And the directors said overall performance for the year will likely be ahead of their previous expectations. DS Smith is one of many businesses that have been confounding the market’s expectations recently.

I like the company’s robust cash flow record — ideal for supporting its progressive dividend policy. And after prudently skipping a few dividends in the depth of the pandemic, DS Smith has jumped straight back in to the groove of pushing the shareholder payment a little higher each year.

There’s competition in the sector. But DS Smith is well established. And I think the industry has a tailwind. Meanwhile, with the share price near 290p, the forward-looking yield is running at around 6%. I think that’s attractive.

Kevin Godbold does not own shares in DS Smith.

Imperial Brands

What it does: Imperial Brands is a multinational tobacco company and is the world’s fourth-largest international cigarette company measured by market share.

By John Choong. The Imperial Brands (LSE: IMB) share price has remained rather robust this year, outperforming its parent index by quite some margin. Not to mention, its excellent dividend yield of 7% paired with a solid history of payment makes it a lucrative income stock to buy for my portfolio.

Luxury goods tend to benefit during times of inflation due to their inelastic demand. Most of Imperial’s products are catered to a niche market, and has been evident in the company’s last couple of results. Although growth hasn’t been stellar, it’s certainly been robust, while dividend payments continue to increase. The company also recently announced a share buyback programme, which should bring more value to shareholders.

With its next ex-dividend date estimated to be later this month, I’m planning on starting a position and capitalising on the ability to generate passive income in the current inflationary environment.

John Choong has no position in Imperial Brands.

Direct Line

What it does: Direct Line provides motor and general insurance in the UK.

By Christopher Ruane. Insurance tends not to be a very exciting business. In fact, it is often rather boring. As an investor, though, that is precisely why I like it. Demand is relatively stable, proven operators have enough experience to price risks at the right level, and the business model does not look like it will stop working any time soon.

Direct Line (LSE: DLG) has those characteristics. It avoids the more exotic corners of the insurance market and is highly profitable.

Right now, Direct Line shares yield 11.4%. That is certainly attractive to me, which is why I own some. It is also high compared to most FTSE 250 peers, though. Does that suggest a cut is coming? Rising vehicle costs pose a threat to profit margins and that could continue in coming years. But the company’s business model, iconic brand and large dividend make it appealing to me.

Christopher Ruane owns shares in Direct Line.

Tritax Big Box

What it does: Tritax Big Box REIT owns, manages and develops logistics real estate in the UK.

By Paul Summers: My pick for November is FTSE 250-listed real estate investment trust (REIT) Tritax Big Box (LSE: BBOX). Having tumbled over 40% in value in 2022, its shares yield a very respectable 4.9%. 

Now, I could shoot for more income elsewhere. However, I’d rather back Tritax for two reasons. First, it’s a relatively low-risk way of tapping into the ongoing growth of e-commerce (the company provides warehouses for some of the biggest retailers around).

Second, the fact that REITs are able to raise rents to cover rising costs without too much fuss makes Tritax a great option for battling inflation. 

Having coveted the stock for so long but been put off by the price tag, now could be an excellent time for me to begin building a position by buying its shares in November. 

Paul Summers has no position in Tritax Big Box.

Aviva 8 ⅜% PF 8 ⅜ CUM IRRD PRF #1

What it does: Aviva is a multiline insurance company. Its preferred stock pays a fixed dividend of 8.375p per year.

By Stephen Wright. My best British income stock for November is Aviva 8 ⅜% PF 8 ⅜ CUM IRRD PRF #1 (LSE:AV.B) Catchy name, but what is it?

In short, it’s Aviva’s preferred stock. Unlike the common equity, the stock pays a fixed dividend of 8.375p per year. 

That dividend has to be paid by management before any dividends get paid to common shareholders. And if it doesn’t get paid in a particular year, it rolls over and all of the outstanding dividends have to be paid to preferred shareholders before any are paid to holders of common stock.

The shares can’t be bought back by the company outside of an Extraordinary General Meeting. So I expect to keep receiving the dividends from these for some time.

In a turbulent market, I’m looking for something relatively predictable. That’s why I’ve settled on this as my choice.

Stephen Wright owns shares in Aviva 8 ⅜ PF 8 ⅜ CUM IRRD PRF #1.

M&G

What it does: M&G is a savings and investment management company, managing shares, real estate and other assets.

By Alan Oscroft. Like others in the investment management business, M&G (LSE: MNG) has fallen out of favour among investors in the current economic crisis.

The share price slumped when inflation started escalating a few months ago. After a modest October recovery, though, M&G is only around 10% down over the past 12 months.

That still leaves the forecast dividend on a hefty 10.5% yield. It’s risky relying on a dividend forecast. But M&G is currently engaged in a share buyback programme, which suggests it has the cash available.

The incoming chief executive and the chairman both bought M&G shares in October, which is also encouraging.

In the first half, its Wholesale Asset Management business achieved net client inflows for the first time since 2018. The second half could prove tougher, and that’s where the short-term risk lies.

But I’ll be considering M&G as the next stock for me to buy as a long-term dividend investment.

Alan Oscroft does not own M&G shares.

BlackRock World Mining Trust

What it does: BlackRock World Mining Trust in an investment trust that runs a diversified portfolio of global mining stocks.

By Ben McPoland. The decarbonisation of the global economy is going to take many decades. And this transition is going to need a lot of raw materials. Whether it’s iron ore to make wind turbines or lithium for the batteries of electric vehicles, decarbonisation is a massive tailwind for mining companies. The BlackRock World Mining Trust (LSE: BRWM) is perfectly placed to capture this demand, I believe, as it has positions in most of the companies mining and selling these vital raw materials.

Some of the trust’s largest holdings include BHP Group, Glencore, and Rio Tinto. It has a dividend yield of 7%, and the payouts have increased substantially over recent years

It should be noted that mining shares can experience much more volatility when compared to other investments. However, I’d be inclined to see dips in the trust’s stock price as opportunities to buy more for my holdings. I intend to start a position myself in November.

Ben McPoland has no position in BlackRock World Mining Trust.

Let me dig into this income opportunity in more detail.

Household name

The stock in question is asset manager M&G (LSE: MNG).

M&G is a household name, which helps it attract and retain customers. I expect financial services to see robust customer demand over the long term, although there may be ups and downs along the way depending on how much spare cash people have to invest.

M&G is positioned to benefit from that thanks to its existing customer base and well-known brand. As asset management can involve large sums, even a relatively modest seeming commission can lead to healthy profits. Over the past two years, for example, the company’s post-tax profits totalled £1.2bn. That strikes me as a lot for a company with a current market capitalisation of £4.3bn.

Those profits were very unevenly distributed across the two years, however. That shows how the reported profits of a firm like M&G can be affected by moves in market valuations. In the long term I do not see that as worrying, although it can make it more challenging for an investor to decide what the fair value of an asset management firm is.

Challenging market conditions

M&G faces other challenges right now that could also affect its valuation. The UK asset management industry has fallen out of favour with many investors, who are worried about swings in markets and also unexpected sell-offs by some firms as we witnessed recently. That could hurt demand for asset management services if investors take fright.

At the half-year stage though, M&G raised its interim dividend from 6.1p per share last year to 6.2p this time round. That is a modest increase but struck me as a sign of management confidence. It also means that this FTSE 100 share now yields 10.2%, which I find very attractive. It also noted that its current solvency ratio underpins the company’s dividend policy of aiming to maintain or increase its annual payout.

The firm sounded a cautiously optimistic note on its outlook, including the ongoing turnaround in its wholesale asset management division. Even in the two months since the interim results, circumstances have become more challenging for financial service providers due to big swings in markets. But I think M&G’s business strategy, strong brand and established customer base could help it continue to do well in years to come.

I’d buy this FTSE stock

The wider market seems to have some doubts though, having marked down the M&G share price by 10% over the past year.

That fall is not nearly as bad as the decline seen over the past year at some other asset managers in which I have invested. abrdn and Jupiter are down 40% and 58% respectively, for example.

I think the fall does offer me an opportunity to increase my holding of M&G shares. If I had spare cash to invest now, I would do that.

I’m cautious of big dividends, as they might be unsustainable. But I see the current depressed position of the FTSE as a good opportunity to buy top stocks at discounted values. Moreover, when share prices fall, dividend yields go up. And the dividend yield is always going to be reflective of the price I pay for the stock.

So, let’s take a look at two passive income stocks trading at knockdown prices.

Lloyds

Lloyds (LSE:LLOY) was one of hundreds of UK-listed stocks that took a hit after the chancellor’s mini budget in late September. The bank has also fallen on reports that Prime Minister Truss’s new cabinet has looked at changing the Bank of England’s money-printing programme in an effort to avoid a £10bn payout to financial institutions.

But with the bank now trading for around 42p, the dividend yield has pushed upwards. As a result, buying at today’s price, I could expect an attractive 4.8% yield. That’s pretty good going and I’d expect it to be fairly safe right now. Last year Lloyds had a dividend coverage ratio of 3.75 — anything over two is considered to be pretty healthy. We might even see the dividend payments increase in the coming years.

Performance is also impressive. In July, the bank said that net income had surged 65% to £7.2bn for the six months to June 30. And this is likely to continue improving as net interest margins (NIMs) — the difference between savings and lending rates — keep rising on the back of higher BoE rates.

I appreciate that rampant inflation and a recession won’t be good for credit quality, but higher margins will more than make up for it. I already own Lloyds shares but I’d buy more today.

M&G

M&G (LSE:MNG) is a UK-based savings and investments firm. However, this is not an easy business to be in right now. Amid a cost-of-living crisis, rampant inflation, and volatility in the markets, attracting and retaining clients is a challenge.

The share price has also seen some considerable downward pressure since Liz Truss came into office. The stock is actually down 15% over the past month.

Despite this, M&G performed positively in the six months to June 30. M&G saw net client inflows of funds (outside its Heritage business) and net outflows of about 1% of assets under management. This isn’t bad considering economic conditions.

Adjusted pre-tax operating profits fell from £327m to £182m, but that reflects market conditions. Assets under management and administration decreased by £21.1bn to £348.9bn.

However, conditions will change. The market will improve and investors will be more incentivised to save and invest. And that’s why I see the current dip as a good time to buy. The stock also offers a handsome 10% dividend yield.

But plenty of shares are down. And I think it’s made a lot of attractive ones look even more tempting. Here are three that look like better buys to me.

Pillows to cry on

Home furnishings provider Dunelm Group (LSE: DNLM) did well during the pandemic. When it was harder to move house, or even to go shopping for home improvement items, online sales saw big benefits.

That effect has pretty much faded and the share price is back down close to its long-term trend. But could a new squeeze on mortgages lead more people to buy stuff at Dunelm instead of trying to move house?

Investors didn’t seem to think so Wednesday, pushing the Dunelm share price down another 4% by the afternoon. But that’s dropped the stock’s trailing price-to-earnings (P/E) ratio down to 8.6. And it’s boosted the forecast dividend yield above 5%.

There will be uncertainty over that dividend now, and I expect more short-term pain. But I think Dunelm looks like a good one for investors to buy for the long term.

Investors fleeing

The financial sector has taken a battering, and that includes investment manager M&G (MNG). It’s not surprising, as investors withdraw funds to invest in things they consider safer.

I expect short-term pain here again, following an 8% share price fall on Wednesday. And there could well be further declines to come as we head into a gloomy financial winter.

But what about the long term? I reckon all those investors will return when the storm clouds start clearing, shovelling their cash back into investment managers’ hands. It happens every time there’s a stock market slump followed by a recovery. And I don’t know any stock market slump yet that hasn’t recovered.

So yes, I see M&G as a good long-term investment. It might, however, get even cheaper in the coming months.

Drowning sorrows

J D Weatherspoon (LSE: JDW) shares fell 6.5% on Wednesday, tumbling to a 12-month loss of more than 60%.

The pub chain is due to deliver full-year results on 7 October. And it’s not set to be a good year, as the hospitality business is still rebuilding after its pandemic hammering. We should see a second year of losses this year.

But forecasts indicate a return to profit in 2023, with a fairly undemanding forward P/E of around 13. There’s some earnings growth on the cards for 2024 too. These are tentative forecasts, and I think Wetherspoon could be the riskiest of the three stocks here.

But I can’t help seeing a decent stock market recovery candidate here. I mean, Brits and booze, we kind of go together, don’t we? It’s a bit like Americans and incomprehensible sports — though I probably shouldn’t say that, in case anyone mentions cricket.

But identifying rewarding dividend stocks is tricky. Payouts can depend on the company’s quarterly and annual performance. Therefore, I favour companies that have a consistent dividend history alongside stable financial performances. Let’s look at two UK shares that stand out as key candidates for my passive income portfolio. 

M&G

Global investment manager M&G (LSE: MNG) currently trades just under 197p. Half-year results crashed the share price in August and it fell 12% to 196p. Yet the stock remained robust over the last 12 months with just a 1% fall. With an impressive dividend history, I think this UK share can help deliver the second income I’m after. 

M&G offers a 9.11% dividend yield. Its interim payout follows previous figures, with 6.2p per share to arrive on 29 September. A buyback should elevate shareholder value as £150m of a total £500m is deployed. By the end of September, M&G will have returned an impressive £1.5bn to investors since FY19. 

Yet the company needs to financially sustain this. Assets under management fell from £370bn at the beginning of FY22 to £349m in its half-year report. Management blamed this on adverse market movements. Consequently, post-tax profits plummeted 75% from a loss of £248m to £1.04bn. 

This suggests the dividend aristocrat may struggle to deliver future payouts. But I’m not concerned. M&G increased capital generation from £309m to £439m. Management also announced acquisition of Continuum Financial Services. This indicates the company can remain afloat through short-term profit falls and begin increasing revenues through its new customer base.

I think M&G can recover from its wavering financials and continue to deliver on its average final payout of 17.4p (since FY19). Indeed, I’ll be adding M&G shares to my passive income portfolio. 

Imperial Brands

Imperial Brands (LSE: IMB) is another UK share I’d consider. Strong revenue increases resulted in its share price leaping 10% in mid-May, while the tobacco company has seen a 26% rise over the last year. It now trades at 1933.

Yet the half-year report wasn’t all positive. Operating profits fell 27% to £1.2bn. A departure from Russian markets (estimated at £201m) and divestment from the Premium Cigar Divisions (£281m) clearly took a hit.  

However, the company has expanded its Pulze product range in European markets and Blu marketing proposition in the US. Net revenues from next-gen products increased 39.5%, totalling £77m. This indicates Imperial has successfully adapted to the changing market as consumers increasingly switch from cigarettes to electronic vapes. 

The company also boasts an impressive dividend history. With an average final payout of 167p since FY17. Its dividend yield currently stands at 8.4%. With the successful launch of NGPs in Europe and the US, I think payouts will continue to arrive at similar figures.

Despite a fall in operating profit, the company is increasingly adapting to its market and demonstrating high prospects in overseas markets. This gives me faith that Imperial can continue to deliver strong payouts for the foreseeable future. Imperial will certainly be a staple of my passive income portfolio. 

Long-term prospects from dividend shares

The sort of dividend shares I like to own in my portfolio are ones that offer me good income prospects not only now but also in the future.

At the moment there is a looming risk of an economic downturn. That could hurt income at some companies, reducing or eliminating altogether their ability to pay dividends. After all, dividends are never guaranteed.

So I am looking for companies I hope can perform well in coming years. The two shares do both face risks from a worsening economy if it leads customers to withdraw funds from their services. That could hurt profits. But with a generous yield north of 9% in each case, I am happy to take that risk as I think it is already reflected in the share prices.

Asset managers

The two shares in question are M&G (LSE: MNG) and abrdn (LSE: ABDN). Both are asset managers. Both have a juicy dividend yield: 9.3% at M&G and 9.9% at Abrdn. So if I invested £10,000 evenly across the duo today, I would be eyeing annual income from these two dividend shares close to four figures.

I think the bull case for both is similar. They benefit from strong brands that can help them attract customers (despite abrdn’s silly corporate name, it also owns the Interactive Investor operation). They both have long experience and deep expertise when it comes to investing. That can help them in running their businesses and attracting new clients.

Attracting and retaining clients is a key challenge right now in the asset management industry. At the half-year point, M&G saw net client inflows of funds (outside its Heritage business). M&G saw net outflows of about 1% of assets under management. Compared to the picture at rivals like Jupiter, I see this performance as decent.

Both M&G and abrdn have a policy of aiming to maintain their dividend – M&G even wants to raise it if it can. But there is a risk that market turbulence hitting profits could hurt dividend cover. abrdn, for example, held its interim dividend flat, but the cover on an adjusted capital generation basis fell to 0.7 times in the first half. That is not sustainable in the long term, so I am hoping that it will focus on stemming outflows like M&G has been doing. After falling out of the FTSE 100 last month, I feel Abrdn has work to do on reassuring shareholders that it plans to return to growth mode.

Why I own these shares

Despite the risks, I think both businesses have good long-term prospects. Meanwhile, if they can deliver on their policies and keep the dividends flowing at their current level, I will be handsomely rewarded as a shareholder.

For that reason, I plan to keep holding both of these dividend shares in my portfolio and would consider buying more.

JD Sports

For growth, I would pick retailer JD Sports (LSE: JD). The retailer has seen its shares tumble 43% over the past year. But that looks overdone to me.

JD has a strong position in its home market in the UK. But it also has a sizeable international operation spanning countries from the US to Australia. I think that could provide a platform for future sales growth. The company’s proven retail model is highly profitable. Last year saw the company report record revenues and profits and it expects to perform at the same level this year.

There are numerous retailers in the FTSE 100 and a recession can squeeze profits in the sector, so why am I considering adding more JD Sports shares to my existing holdings?

I think the long-term demand outlook for sports and leisurewear is strong. JD is a seasoned operator with attractive profit margins compared to some areas of retail. Last year, for example, its post-tax profit margin was 5.3%, compared to 2.5% at Tesco.

Recent management changes have unsettled investors but the company has a successful formula and I think it can continue to benefit from that. I see substantial growth opportunities ahead for JD and I am happy to hold its shares in my portfolio for the long term.

M&G

A lot of FTSE 100 shares right now have attractive income prospects. One I already own and would happily spend more money on is asset manager M&G (LSE: MNG).

The asset management industry has a bright future, in my view. Over time, I expect people will still want to save and invest money, which should be good for fees at asset managers. But the shorter term outlook is less rosy. Market volatility is causing some investors to pull money from funds, threatening profitability in the industry.

Does that make now a good or bad time to invest in asset managers? Unlike some peers, M&G shares have mostly held their value over the past year, sliding less than 5%. I think that reflects investor enthusiasm for the company’s income outlook.

Not only does M&G have a dividend yield of 9.4%, it also aims to maintain, or increase, the payout annually. If it is able to deliver on that promise, which is not guaranteed, I think the current share price offers me excellent value.

The business benefits from some things that could help it now and in the future. A strong brand, long heritage and substantial existing customer base could help M&G continue to attract and retain clients. I would happily consider adding to my existing holding of M&G shares.

M&G

Asset manager M&G (LSE: MNG) announced its interim results this week and they were a mixed bag. But there was a fair bit of good news, including a net inflow of client funds over the past six months. On top of that, the firm announced an increase in its interim dividend.

The rise was modest, at under 2%, but I think it is a sign of management confidence at a time when many asset managers are struggling to stem client fund outflows. It also means M&G’s dividend yield now sits at 8.2%. I find that very attractive and continue to hold the shares in my portfolio.

A worsening economic environment could lead to investors getting nervous and pulling funds out of investments. That remains a risk to revenues and profits at M&G. But I think the company may benefit from its strong brand and positive business momentum. If it can stick to its aim of maintaining or raising the dividend each year, it could end up being one of the more lucrative dividend shares in my portfolio.

Imperial Brands

Another of the income shares in my portfolio is tobacco giant Imperial Brands (LSE: IMB). At the moment, the shares yield 8.5%. Imperial’s dividends are usually paid quarterly but are split unevenly. Two quarters have comparatively large dividends, while the other two have smaller payouts. The total annual payout has started to grow very slowly again, following a big cut a couple of years ago.

With cigarette use declining in most markets, there is clearly a long-term risk to both revenues and profits. Unlike many competitors, Imperial has doubled down on cigarettes. It does have a non-cigarette business but has reduced its ambition for that part of its portfolio. It has sold off its premium cigars business and is focussed on trying to increase the market share of its cigarette brands in key countries.

I actually think that strategy could help the company keep generating massive cash flows. Although cigarette use is declining, that is a gradual process that has been going on for decades in some markets. Imperial has learned how to operate in such an environment.

The addictive nature of cigarettes means that, like competitors, it is able to raise prices on its products without losing too many customers. That can help to offset volume declines. Even as volumes fall, Imperial still shifted the equivalent of over 100bn cigarettes in the first half of this year.

Why I am buying FTSE 100 dividend shares

No dividend is ever guaranteed. But I think both M&G and Imperial can continue to perform strongly as businesses in coming years.

Not many FTSE 100 members offer yields over 8% but these shares both do. That is why I have tucked them away in  my portfolio as I try to grow my passive income streams.

The M&G dividend yield is 8.2% at the moment – and yesterday the firm announced an increase to its interim payout. That yield certainly tempts me to add more M&G shares to my portfolio. But how sustainable is it?

Good news on the M&G dividend

The company has a policy of maintaining or increasing its dividend each year. Of course, dividends are never guaranteed, but I think it is positive that management at least aims to avoid a cut.

Yesterday, M&G announced its results for the first six months of the year. There was good news on the dividend front. Not only was the interim dividend maintained, it was actually raised to 6.2p per share. Last year it was 6.1p, so the raise is less than 2%. But I see it as a positive step.

That does not mean the full-year dividend will necessarily also be raised at the same rate. However, I am optimistic the annual payment this year will end up being bigger than it was last year. The company struck an upbeat note about its prospects, saying: ”We feel momentum is continuing to build in the business”.

Dividend sustainability

So is this dividend sustainable? After all, a yield of over 8% seems high compared to the overall market and could signal investor doubts about whether it will continue.

M&G is not alone among its peers in having a high dividend yield at the moment. The yield at rival Abrdn, for example, is a smidgen higher at 8.5%, while Jupiter offers a whopping 14%. Unlike M&G, those two companies have both seen their share prices fall by at least 40% over the past year.

They both saw net outflows of client funds in the first half, but M&G actually saw a net inflow. I see that as a good sign. One risk to the M&G dividend in recent years has been the risk of lower profits due to clients withdrawing funds. So the net inflow in the past six months is reassuring.

Ongoing risks

As the yields in the sector suggest though, asset managers remain under a lot of pressure. The gloomy economic environment could hurt profits, for example if clients withdraw funds due to weak market performance.

Even after the net inflow of funds, M&G saw assets under management fall £21bn to £349bn compared to the same period last year. It also saw a 44% drop in its adjusted operating profit before tax.

So while the company is doing well in some regards, clearly it will still need to work hard in coming years to handle the challenge of difficult markets. If it can do that successfully, I think the M&G dividend can last. That is why I continue to hold the shares in my portfolio.

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

DS Smith

What it does:  A provider of sustainable packaging solutions, paper products and recycling services. 

By Paul Summers: Down a third in value in the last year. DS Smith (LSE: SMDS) has given up most of the share price gains it made in the post-pandemic recovery. 

But I wonder if the market has become too bearish. The new financial year has “started well” according to the company and management expects “further substantial improvement in performance” in FY23.

An increase in capital expenditure was never likely to be celebrated but, on a more positive note, the shares now trade at just eight times forecast earnings. 

The dividends look pretty solid, too. DS Smith is forecast to yield 5.7% in the current financial year. This payout should be covered by expected profit if analyst predictions are hit.

As a source of passive income as part of a diversified portfolio, I think the shares are worth a closer look. 

Paul Summers has no position in DS Smith

Clarkson 

What it does: Clarkson provides an array of shipping services such as shipbroking. 

By Royston Wild. Resilient trading at shipbroking giant Clarkson (LSE: CKN) suggests (to me at least) that this remains a top dividend growth stock to buy. 

Cyclical businesses like this face the risk of cooling profits as global growth stalls. But trading conditions at Clarkson remain white hot (it said last month that it expects profits in 2022 to come in “materially ahead of its previous expectations.”). 

Shipping rates remain solid as vessel shortages of all classes roll on. Meanwhile, the war in Eastern Europe has pushed up rates, too, as ships bound for Russian and Ukrainian ports are diverted to already-packed ports elsewhere. This is removing even more capacity as vessels sit waiting to unload their cargoes. 

City analysts think Clarkson’s earnings will soar 22% year-on-year in 2022. And so they are tipping exceptional dividend growth as well, to 92.2p per share. That would represent a 10% year-on-year increase.

This projection creates a healthy 2.7% dividend yield. And the predicted dividend payment is covered 2.3 times by anticipated earnings, too.

Royston Wild does not own shares in Clarkson. 

Hargreaves Lansdown

What it does: Hargreaves Lansdown is the largest provider of retail-focused investment services in the UK.

By Edward Sheldon, CFA. Hargreaves Lansdown (LSE: HL) shares have experienced weakness in 2022 and this has pushed the dividend yield up to a very attractive level. With analysts expecting the group to pay out about 40p in dividends for the year ended 30 June 2022, the prospective yield on offer here is currently around 4.6% – considerably higher than the average FTSE 100 yield.

But this stock isn’t just about dividends. In my view, it has the potential to reward investors with healthy long-term capital gains as well. The reason I’m bullish here is that Hargreaves Lansdown is essentially a play on the world’s stock markets. And markets tend to rise over time.

One risk to consider here is that new competitors are emerging. These companies could potentially steal market share from Hargreaves. However, with the stock currently trading on a P/E ratio of less than 20, I think a lot of this risk is already priced into the stock.

Edward Sheldon owns shares in Hargreaves Lansdown

DS Smith

What it does: DS Smith is the UK’s leading manufacturer of recycled paperboard and corrugated packaging.

By Zaven Boyrazian. With consumer spending declining, e-commerce businesses haven’t had the best time in 2022. Yet, looking at the bigger picture, our current economic environment is ultimately a short-term problem. And online spending continues to grow as a proportion of total retail spending.

That’s why DS Smith (LSE:SMDS) has caught my attention. The cardboard manufacturer doesn’t have an exciting business model. But it does provide a critical product for the e-commerce sector.

With investor confidence at record lows, the stock has dropped by over 37% in the last 12 months. Yet looking at the latest results, sales and profits are up by double digits. But more excitingly, its return on capital employed has jumped from 8.2% to 10.8%, on track to hitting management’s long-term target of 20%.

In other words, despite headwinds, DS Smith is generating impressive growth and value for shareholders. Paring that with a discounted share price spells a buying opportunity for my portfolio, in my opinion.

Zaven Boyrazian does not own shares in DS Smith.

M&G

What it does: M&G is an investment manager that offers savings and investment products across a number of countries.

By Christopher Ruane. For M&G (LSE: MNG), could August be a big month?

I think the answer may be yes. Interim results are due to be released on 11 August. The company’s policy of maintaining or increasing its dividend annually seems to make the shares attractive – if the firm can keep delivering on it.

Last year, the interim dividend rose by 1.7%. But the full year dividend increase was a meagre 0.4%. With a strong brand, long experience and a substantial customer base, the firm has a recipe for profitability. I see the risk of clients withdrawing funds as a threat to profits in coming years. The company reported net inflows of client funds last year. Hopefully that positive trend has continued.

Meanwhile, the dividend yield is 8.4%. So I do not mind if M&G delivers another modest rise or none at all. As long as the firm does not cut its dividend, I think the income opportunity here is attractive.

Christopher Ruane owns shares in M&G.

Ashmore

What it does: Ashmore is an asset management firm that has a presence across the globe and specialises in emerging market investing.

By Andrew Woods. Ashmore (LSE:ASHM) has been consistent with its dividend policy over the past five years. During this time, it has paid well above 16p per share every year. For the year ended June 2021, the firm paid a total dividend of 16.9p per share. At current levels, this equates to a dividend yield of 7.99%. For me, this is appealing.

In the current economic climate, however, customers have generally been more risk-averse, meaning that emerging market investments have suffered. This has been caused by a multitude of factors, including inflation and interest rate hikes. To that end, in June the company’s assets under management declined by 18.3%, quarter on quarter.

However, for the six months to 31 December, the business beat earnings expectations of £89m, instead posting £92m. Furthermore, over the long term the company continues to report consistent growth. Between 2017 and 2021, for instance, pre-tax profit and revenue continue to increase markedly.

Andrew Woods owns shares in Ashmore.

Vesuvius

What it does: Vesuvius makes equipment used in foundries to handle molten metal and control its flow.

By Roland Head. Vesuvius (LSE: VSVS) can trace its history back over 100 years, to the fast-growing US steel industry of the early 20th century.

Today, the company’s product range is broader and more sophisticated. But its core specialism of handling molten metal is unchanged. I think that’s attractive — this business is a market leader in a very specialised market.

Another big attraction for me is that more than 95% of the parts Vesuvius sells are consumables. These need regular replacement.

The only real risk I can see is that customer demand could slow during a severe recession.

I see that as an acceptable risk, especially as Vesuvius is tapping into new growth markets like wind energy.

Management recently reported strong trading and a positive outlook for the rest of the year. Vesuvius shares currently offer a well-supported 6.5% dividend yield. I see this dividend stock as a good buy in August.

Roland Head does not own shares in Vesuvius.