Top British dividend stocks to buy for February

Each month, we ask our freelance writers to share their best ideas for buying dividend stocks with you – here’s what we’re talking about for February!

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

Aviva

What we do: Aviva is the UK’s leading insurance, wealth and pensions business.

By GA Chester. Aviva (LSE: AV) is a top pick for current income. Recent dividend cuts from sector peers Direct Line Insurance has not dampened my spirits.

Aviva’s dividend is not guaranteed, but its diversified business across lines of insurance, wealth and pensions is a key strength. And the third quarter trading update, published in November, gave confidence to the outlook, financial targets and prospects for the group.

Management reported “Trading momentum continues to be strong” and the position of the capital “well above the top-end we target some”. He said the dividend guidance remains unchanged. As expected to begin additional capital returns to shareholders, with full year results scheduled for March 9.

The dividend guidance is 31p per share for the year, with an increase to 32.5p for 2023. At a share price of 440p as I write, the yield is 7%, rising to 7.4%. And there’s the start of the anticipated additional capital return on top, too…

GA Chester has no shares in Aviva or Direct Line Insurance.

DS Smith

What we do: DS Smith is one of Europe’s largest cardboard manufacturers, playing a critical role in the e-commerce supply chain.

By Zaven Boyrazian. E-commerce isn’t having the best of times lately. With consumer spending falling off a cliff due to shaky economic conditions, online shopping volumes have fallen. And that is arguably the big reason why DS Smith The lowest value of SMDS in 2022

As a reminder, the dividend stock is one of Europe’s largest cardboard producers. It’s not the most exciting company, but packaging materials play an important role in e-commerce.

Unsurprisingly, the company reported a 3% decline in volume in its latest results. However, on the back of some price increases, revenue and earnings are actually up – and not by a small amount. Pre-tax profits increased by 80%, which led to a 25% increase in shareholder dividends.

Combined with depressed valuations, the dividend yield currently stands at 4.7%. While there is still a risk of a sharper drop-off in volume if the economic situation worsens, the long-term income potential makes the risk worth taking, in my opinion.

Zaven Boyrazian has no shares in DS Smith.

European Assets Trust

What we do: European Assets Trust is an investment trust focused on small and medium-sized companies in Continental Europe

By Christopher Ruane. As an income investor, dividend cuts rarely seem like welcome news. But that was announced in the first week of the year by European Assets Trust (LSE: eat). Annual dividend for 34% compared to last year.

However, I still see the trust as a potential income generator for my portfolio and would buy it if I had the money to invest.

That cut still gives a prospective dividend yield of more than 6%. It is consistent with the trust’s payout policy based on net asset value, meaning that dividends can bounce back in the future if the trust’s shareholdings do well.

The opposite is also true, though: it may go down. Inflation can affect profits in some trust investments. But I like exposure to advanced economies. I also think focusing on smaller companies rather than mature giants offers growth potential.

Christopher Ruane has no shares in European Assets Trust.

Glencore

What it does: Glencore is a commodities giant that trades and mines various metals and other resources.

By John Choong. Like many commodity stocks, Glencore (LSE: GLEN) shares had a volatile period in the first half of last year due to the volatility in China’s manufacturing environment. However, it was able to rally in the second half, and finish 2022 on a high with a gain of 45%.

Although the consensus for investors is to buy low and sell high, I chose to buy high with Glencore. The stock may be trading at a five-year high, but its relatively low multiple and bright prospects in the medium and long term make this a good investment for me.

The dividend yield isn’t amazing by any means at just over 3%, but with coal prices expected to hold up very well this year while other metals strengthen, I’m sure that profit will translate into a growing dividend and share price. After all, two JP Morgan and Citi The highest value of PT.

John Choong has a position in Glencore.

IG group

What we do: IG Group is a FTSE 250 global leader in online trading and investing.

By Paul Summers: After holding dividend stocks, I started thinking about rebuilding my position IG group (LSE: IGG) for earnings that have been consistently dumped. The stock is yielding 5.8% as I type. That’s almost double the 3% yield from FTSE 250 totally.

Naturally, no dividend stream is truly safe. A company’s ability to keep generating cash depends on whether it can continue to generate profits.

I don’t see this as a problem for IG, especially in the current economic environment. In contrast to most businesses, it is benefits of market volatility as more traders want a slice of the action. Thus, the dividend is expected to be covered twice by the profit in the current financial year.

This, when combined with high operating margins and a strong balance sheet, makes a price tag of nine times earnings seem very reasonable.

Paul Summers has no position at IG Group

Legal & General Group

What we do: Legal & General is a financial services company specializing in insurance, investment, and retirement solutions.

By Edward Sheldon, CFA. It’s hard to ignore Legal & General (LSE:LGEN) pays a dividend now. For 2022, analysts expect the company to pay a dividend of 19.4p per share. This share price is from 7.5% on the current share price.

But it’s not just the headline results that surprise me here. Another important thing is the company’s dividend track record. Over the last decade, Legal & General has been a reliable dividend payer. And has increased its pay significantly over this time.

For the price, this is very low nowadays. As I write this, the price-to-earnings (P/E) ratio of dividend stocks is less than eight. Given this low price, I also think there is potential for the stock to gain value here.

Please note that Legal & General stock may be volatile. During periods of market turmoil, they tend to fall more than the overall market. I think the key is to ignore the volatility of the stock price and focus on the big dividend that pays out.

Edward Sheldon has no position in the Legal & General Group.

Move right

What we do: Rightmove is a property platform. With 692,000 properties and 18,969 customers, it is the largest in the UK.

By Stephen Wright. With a dividend yield of around 1.5%, Move right (LSE: RMV) is hardly an income stock pick. But there are a few things to keep in mind when it comes to corporate shareholder returns.

The first is that Rightmove’s dividend has been huge. Over the past ten years, dividends per share have grown by an average of 10% per year.

Another is that Rightmove returns a lot of cash to shareholders through share buybacks. This allows shareholders to sell a portion of their investment without diluting their stake in the company as a whole.

In total – through a combination of dividends and buybacks – Rightmove returned around £239m to shareholders. At current prices, this yields more than 5%.

That’s why Rightmove is the best UK income stock to buy for February. Dividend increases and a significant buyback program mean there is a lot going on from an income perspective.

Stephen Wright owns shares in Rightmove.

Rio Tinto

What we do: Rio Tinto is a global metals and mining company. It supplies the world with materials such as iron ore, copper and aluminum.

By Harshil Patel. With a market capitalization of just over £100bn, Rio Tinto (LSE: RIO) is one of the largest listed companies in the FTSE 100.

I would describe it as a high quality business. It offers a long-standing track record and has a history of providing above-average shareholder returns.

In addition to a double return on capital employed and a profit margin, Rio offers a forecast dividend payment of 6%.

And even though the stock is trading near highs, the stock still looks cheap to me. The P/E ratio of 10 appears to be in the lower half of its historical range.

Going forward, opening up China’s economy could increase infrastructure spending. That should lead to earnings growth and potential dividend growth as well.

Remember that the mining sector is cyclical, though. A downturn in the global economy can often have the opposite effect.

Overall, though, Rio strikes me as a decent dividend stock with increasing potential for growth.

Harshil Patel has no stake in Rio Tinto.

TP ICAP

What we do: TP ICAP operates in various financial markets, providing brokerage, data solutions, and liquidity to trading clients.

By Roland Head. FTSE 250 financial services group TP ICAP (LSE: TCAP) yields a 2023 dividend of 7%. The company has regained growth after a difficult period and is expected to report increased profits in 2022 and 2023.

By matching buyers and sellers for deals that cannot be done on the electronic exchange, TP ICAP brokers earn handsome commissions.

The demand for these interdealer brokerage services is not what it used to be, but the company has diversified by developing commodities and developing new data services for clients.

Rising interest rates and yield volatility are generally good for companies. However, one concern I have is that it is difficult for outside investors to predict how market conditions will affect performance, especially in the core brokerage business.

Even so, TP ICAP stock looks affordable to me. Trading at seven times forecast earnings, I see dividend stocks as a good income buy.

Roland Head has no shares in TP ICAP.