bank notes

In our Data section, you can find our regularly updated dividend yields for the FTSE 100. Top UK dividend stocks within the index provide the opportunity to make passive income from the dividends that are received. However, the dividend per share and the share price can change over time. Therefore, picking sustainable stocks is important. Here are three stocks that we like the look of at the moment.

A defensive top UK dividend stock

National Grid (LSE:NG) are a well known gas and electricity supplier, servicing the UK and also some parts of the US. The company looks attractive to us with a positive long-term outlook.

One element of this comes from the push towards renewable energy and achieving net zero goals within quantifiable timeframes. For example, it has a goal of carbon neutral construction projects by 2025/26. If the business can keep up with and set further goals in this area, it’ll be an appealing stock for ESG investors to consider buying.

A strategic win for the company was also seen only a few weeks ago. The Competition and Markets Authority (CMA) confirmed it had no issues with the purchase of Western Power Distribution. This is a big win for National Grid, as WPD are Britain’s largest electricity distribution business. The integration should provide National Grid with strong potential to make cost savings through efficiency drives.

In terms of the dividend yield, it currently sits at 3.72%. This is above the FTSE 100 average yield of 3.5%. For the above reasons, we also think that it’s a sustainable stock that could see share price growth in the future.

A renewable energy company

SSE (LSE:SSE) is the second top UK dividend stock that we think is a buy for October. The current dividend yield is 3.89%, making it one of the top yielders currently in the FTSE 100.

The company also operates in the utility space like National Grid. One appealing element both share is the push towards renewable energy. We’d argue that SSE are a bigger player in this space at the moment. With £7.5bn committed from now to 2025 into capex, a sizeable chunk is going towards renewables.

Aside from this, the company is expected to generate around £2bn as part of the disposals programme it is going through. This boosted liquidity should see some flow back to shareholders as dividend income. Even if the company retains the proceeds, it should help to fuel future growth, which should increase the dividend per share naturally over time anyway.

The main risk we see to both top UK dividend stocks is that both are defensive stocks. If we see the UK economy really recover into 2022, the performance of these stocks could lag higher growth, cyclical stocks in terms of share price growth.

Leave a Reply