The 10 best UK dividend shares for 2023?

Starting now, and building a new portfolio of dividend stocks for 2023, what can we buy? Thinking about dividend stocks tends to attract us FTSE 100 stock. But I see some attractive dividends from FTSE 250 also.

I think diversification is a good idea for a new portfolio starting today. I would say it is wise at any time. But we have seen in recent years how individual sectors can suffer disproportionately in downturns. So I rate diversification as very important today.

I do not recommend portfolios here, as investors should do their own research. But as a first pass, I like to choose from the following 10 stocks.

Income sharing

The dividend yield shown is a forecast, so there is no guarantee that it will be maintained. Rio Tinto, for example, has cut its dividend. Further reductions are likely to occur in the short term.

Dividend cut?

Housebuilders, too, may have to cut dividends because the property market has been squeezed. But in the long term, I can only see strong demand for raw materials and housing, generating healthy cash flow to pay those dividends.

I have two insurance stocks on my list. But the business is very different. Aviva is big on savings, investment and pension products. Direct Line, meanwhile, is sticking to direct general insurance products.

There is a diversification push from the City of London Investment Trust. It invests in UK equity, and counts shell, Diageoand AstraZeneca among its top 10 holdings. So diversify from one investment.

Greater yield

Many share prices have fallen over the past 12 months. This indicates the risk of a continued downward trend. And if the dividend is cut, it can really happen. But I still believe that buying dividend stocks for long-term income during a downturn can be profitable.

Whatever dividends the stock pays in the coming years, investors will lock in higher returns on stocks they bought when they were on the decline.

The next step

Before I make the actual purchase, I’ll check a few other things. I want to know how each company’s earnings have covered their dividends over the long term. How visible the company’s future earnings are is another question. And I want to review management’s approach to progressive dividends, ideally with a focus on getting debt down first.

But I chose income stocks, I think narrowing down the selection to 10 or more initial favorites, from a variety of options from the sector, is a good start.