Top
Image Alt

The Investing Box

  /  Editor's Pick   /  2 of the safest dividend shares I plan to buy

2 of the safest dividend shares I plan to buy

Happy couple showing relief at news

Going into the winter, I’m faced with higher bills and lower real income levels. With passive income from dividend shares in mind, now more than ever I want safe, reliable payments. With that in mind, here are two of the most sustainable options for me at the moment, that I’m extremely confident about going forward.

A long-standing dividend share

The first stock I’m referring to is British American Tobacco (LSE:BATS). The business currently offers a dividend yield of 6.27%, above the FTSE 100 average of 3.89%. Over the past year, the share price has risen by 27%, an impressive gain.

It has enjoyed 22 years of consecutive dividend growth, which is one of the hallmarks I look for when trying to find a good dividend share. In large part, the dividend payments over time are a reflection of the core profitability of the business.

The tobacco industry might not be to everyone’s liking, and some might not want to invest in this area. But fundamentally, it’s been a source of high profits for decades now. The high level of repeat custom from people, along with the oligopoly like market structure has allowed the firm to outperform.

Of course, the shift towards vaping and nicotine alternatives means that there’s a risk that British American Tobacco becomes a dinosaur that can’t adapt. However, I haven’t seen any material worrying signs that the business isn’t planning for the future of the industry.

A household favourite

The second stock I’m thinking about buying is Unilever (LSE:ULVR). The share price hasn’t moved massively in the past year, down a modest 3%. In terms of the dividend yield, it’s at 3.8%.

I get that people will say the yield is actually slightly below the index average. This is true, but if I look at the Unilever yield over the past couple of decades, it has been in a tight range between 2.5%-4%. It’ll never set my world on fire, but at the same time I’m pretty confident that for the next decade I could pick up dividends of this size as well. That counts for something.

The reason why it has been such a consistent dividend payer relates to its sector. It owns a range of household brands in all sorts of areas. This ranges from Ben & Jerry’s ice cream to Hellmann’s mayonnaise. The goods have a proven track record of being popular with consumers, generating strong revenue in the past. I don’t see this changing any time soon, which should allow strong profits to be generated on an ongoing basis. From this, dividends should continue to be paid out.

I do need to keep an eye out for the actions of Nelson Peltz, the famous activist investor who buys a stake in a company with the aim of enacting change. Following his large purchase of Unilever stock recently, I’m sure his aims are for the best. But it can cause unnecessary disruption for the business.

I want to add both stocks to my portfolio imminently with free cash.

The post 2 of the safest dividend shares I plan to buy appeared first on The Motley Fool UK.

6 shares that we think could be the biggest winners of the stock market crash

The hotshot analysts at The Motley Fool UK’s flagship share-tipping service Share Advisor have just unveiled what they think could be the six best buys for investors right now.

And while timing isn’t everything, the average return of their previous stock picks shows that it could pay to get in early on their best ideas – particularly in this current climate!

What’s more, all six ‘Best Buys Now’ are available to access right now, in just a few clicks.

Learn more

setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()

More reading

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.