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Why investing for dividends pays off and three favourable UK stocks to consider…

by , 15 September 2015

If you're looking for good stocks to invest in, you should turn your attention to companies paying dividends.

Research shows that stocks with high dividend yields tend to better the performance of ones that don't over the long-term.

And if you're looking to add some offshore exposure to your portfolio, there are a number of stocks that fit the bill.

Let's take a closer look…

The merits of investing in stocks that pay dividends

By investing in stocks that pay high and growing dividends, you benefit on two fronts:

  1. Capital growth; and
  2. A rising income.

When investing for dividends, don’t focus on dividends alone. To ensure you make the best investing decisions, as well as looking at the overall return, you need to look for:

  • Reasonable stock prices;
  • Strong cash flows;
  • Good fundamentals; and
  • Sound management at the top.

As Simon Gergel, a fund manager with The Merchants Trust, tells Money Week, by looking for higher yields in dividend paying stocks, you encourage contrarian thinking. It leads you to look at stocks that are cheap and out of fashion.

Three UK stocks paying great dividends

If you’re looking to add some international flavour to your dividend portfolio, Mr Gergel favours these three UK listed companies…

GlaxoSmithKline (LSE:GSK]
GSK is a world leader when it comes to vaccines and consumer health. The company has taken measures to limit the effects of losing patent protection in the coming years. It’s trading on a dividend yield of 6.28%.

Greene King [LSE:GNK]
Greene King is one of the top brewery and pub groups in the UK. The company has seen solid growth over the years, including its dividend. It’s trading on a dividend yield of 3.57%.

United Business Media [LSE:UBM]
This is an events business, which runs trade shows and exhibitions across the world. It benefits from its size in the industry so has little competition. United Business Media is highly cash generative. It’s trading on a dividend yield of 5.68%.

So there you have it. Why investing for dividends pays off and three favourable UK stocks to consider.

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Why investing for dividends pays off and three favourable UK stocks to consider…
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