My best dividend shares for 2023

All the market volatility during 2022 makes dividend stocks look more attractive to me. Although I don’t have any spare funds to invest right now.

While in many cases share prices have been pushed lower and yields higher, many business fundamentals remain strong. And it’s a good combination.

Compounding dividend yields

Meanwhile, the whole concept of investing for dividends seems to be a good way to proceed in the long term. Part of the profits from stocks can come as income through dividends. So just reinvesting down the road can have a compounding effect that will increase the value of your portfolio over time.

Positive results are never guaranteed though. And because all stocks have risk they also have upside potential. And businesses can run into operational problems at any time.

However, dividend targeting can be a good idea. After all, the alternative to stocks and shares is to focus on capital growth from rising stock prices. But this is only one way that successful businesses can reward their shareholders. And over the past few years, sustainable capital growth has been difficult to achieve.

But I think a dividend-focused strategy works best when the underlying business is defensive. Indeed, cyclical businesses and sectors tend to offer either famine or feast results for investors. And it can lead to volatile stock price movements and dividends that are here and tomorrow. However, defense companies tend to be less sensitive to general economic cycles.

Defensive stocks with great returns

I prefer companies like those in the supermarket sector, for example Tesco and J Sainsbury. There is a lot of competition from many participants fighting for our grocery pound. But the old guard supermarket has risen to the challenge. And my guess is that it will last long enough to generate decent long-term profits for shareholders.

I also like energy companies National Grid with a place at the heart of the UK’s electricity infrastructure. These businesses may benefit from the swing to clean energy.

The company’s operations on both sides of the Atlantic could generate rising dividends for shareholders in the coming years. Although the industry faces a lot of regulatory scrutiny. And National Grid is forced to reinvest a lot of capital to maintain and improve the energy system.

One consequence is a huge debt pile. Although, until now, the company has followed a steady progressive dividend policy.

Top financial indicators

Meanwhile, some of the best financial indicators can be found with manufacturers of smoking products, such as British American Tobacco and Imperial brand. However, this sector faces a lot of regulatory and tax attention. And the volume of cigarettes is declining in the long run.

However, both companies have expanded their business to provide less harmful products to smokers such as vaping. But despite the high dividends, the industry may not attract investors because of ethical concerns.

Finally, I consider the trading platform provider IG group and operators of comparison websites Moneysupermarket.com operating a defense quality business. However, there is competition in both industries and services that can go out of fashion with consumers.

However, they have high yield and a strong record of dividend growth. And he pulls me now to continue for 2023 and beyond.