Every month, we ask our freelance writers to share their top dividend ideas with you — here’s what they had to say for October!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
Barratt Developments
What it does: Barratt Developments, which builds homes across the UK, is the country’s largest housebuilder.
Written by Royston Wild. A construction giant Barratt Developments (LSE:BDEV) offers none of these FTSE 100large dividend payouts up front.
In fact, at 3.3% for the financial year to June 2025, its yield remains below the benchmark average of 3.5%. But City analysts expect equities to rise rapidly in the short to medium term, pushing yields even higher.
For the 2026 and 2027 financial years, dividend yields for Barratt are 4.2% and 5% respectively.
Of course benefits are not guaranteed. And in this case, shareholder payouts could be at risk due to a new downturn in the housing market.
It is encouraging, however, that market conditions are improving as mortgage rates become more affordable. Barratt’s weekly private booking rate per active site was 0.58 between 1 July and 25 August 2024, the latest figures showed. This is up from 0.42 a year earlier.
Barratt also has a strong balance sheet that it can use to pay dividends if the market stagnates or turns bad again. Total revenue was around £870m as of June.
The builder’s shares are down about 10% in the past month. This makes it an attractive dip purchase to consider, in my opinion.
Royston Wild is a shareholder in Barratt Developments.
Dunelm team
What it does: The Dunelm Group is a UK home goods retailer that sells bedding, curtains, furniture, mattresses and more.
Written by Charlie Carman. Dunelm team (LSE:DNLM) paid a dividend of 3.7 %. That is slightly higher than FTSE 250 average.
Worse, shareholders have also been rewarded with special dividends in recent years. This is not reflected in the title of the yield figure. Including this year’s additional payment brings the total yield closer to 6%. But remember, no benefits are guaranteed.
FY24 results were impressive. Revenue increased to £1.71bn from £1.63bn in 2023. Pre-tax profits also rose to £205.4m from £192.7m.
In addition, the view seems bright. The much-anticipated interest rate cut may stimulate housing market activity. The growing number of house movers should increase the demand for home furnishing products. Christmas is often a strong time for trading as well.
The founders of Dunelm – the Adderley family – recently sold 10m shares. They remain the largest shareholder by a clear margin, but there is a risk that this could undermine investor confidence.
Nevertheless, there are still good reasons to consider buying Dunelm shares in October.
Charlie Carman has no shares in Dunelm Group.
IM&G
What it does: IM&G is a property manager with clients in the UK and many other markets around the world
Written by Christopher Ruane. IM&G (LSE: MNG) has delivered high yields for years now. But that doesn’t make it any less interesting in my opinion.
Its goal is to maintain or increase profits year after year. Obviously, the asset manager understands the importance of the dividend in its investment case. Interim results for September saw the latest increase. Share price 2018/12-2011 But the upside is still rising and the current yield is 9.4%. That places M&G among the FTSE 100’s largest-cap stocks.
The first half of the year saw the business generate operating income of £486m – slightly less than the same period last year, but still huge. Its strong brand, large customer base and continued demand for asset management all work in M&G’s favor as a dividend. Weak markets can shut down demand and profits, but I plan to hold on – and continue to earn income.
Christopher Ruane is an M&G shareholder.
Rio Tinto
What it does: Founded in 1873, this British-Australian multinational corporation is the world’s second largest metallurgical and mining corporation. Its main product is iron ore, but it also produces copper, bauxite, diamonds, uranium and a range of industrial minerals.
Written by Harvey Jones. Times are tough for commodity stocks, and everyone knows why. China has been the world leader in human demand for years, consuming 60 percent of the world’s metals and minerals. But the world’s second-largest economy is in trouble and struggling to turn things around.
However, things are looking good as Beijing unveils a new stimulus package while US interest rate cuts could revive the wider global economy.
I Rio Tinto (LSE: RIO) share price is up 5% over 12 months but still looks good value with a price to earnings ratio of 9.97%. Its shares are expected to yield 5.81% next year.
The biggest risk is that China’s latest stimulus plan will fail to turn the dial, and we’ll be back to square one.
However, with a profit like this, Rio Tinto shares look like a no-brainer buy for investors patiently waiting for better days.
Harvey Jones does not own shares in Rio Tinto.
TP ICAP
What it does: TP ICAP is a capital markets infrastructure company and operates as the world’s largest broker for profit.
Written by Kevin Godbold. In August, TP ICAP (LSE: TCAP) has released a good set of numbers for the 2024 half year. The outlook statement was upbeat and CEO Nicolas Breteau said the company is focused on diversification. “it pays off”.
The business facilitates transactions between financial institutions, and market volatility can lead to enhanced trading. Another risk for shareholders is that markets can be quiet leading to lower cash flow and company profits.
We saw the danger playing out leading to the coronavirus. Earnings have been falling for several years and directors have cut the dividend in 2020.
However, dividends and shareholder payouts have been growing steadily since then. There is also a share buyback program in place which suggests that the company has plenty of spare cash coming in.
Meanwhile, with the share price close to 234p, the forward dividend yield to 2025 is just under 6.8%, which looks attractive to me.
Kevin Godbold has no shares in TP ICAP.
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