I’m bullish on the prospects for dividend stocks this year. I think higher inflation and uncertainty could make investors turn to high-yielding shares. In my opinion, there is a fairly long list of dividend shares which may offer good relative performance this year. Here, I’ve picked out 5 of my favourite dividend shares for investing over a long-term timeframe.
Unilever plc (LON:ULVR) (LSE:ULVR.L) may have a dividend yield of 3.58%, but I think it could rise in future. I believe Unilever has good growth potential in EM and in more mature economies. I like the diversity of its brands and I think this could provide more predictable dividend growth. A weaker euro may also provide a forex boost in my view, which may help to raise dividends at a faster pace than they otherwise would without forex gains.
Royal Dutch Shell Plc (LON:RDSB) (LSE:RDSB.L) offers a different dividend appeal for investors than Unilever in my opinion. Its business is riskier in a sense that it is dependent on the price oil and gas, but it yields 6.78%. I think Shell’s dividend could rise because of improvements to FCF in the medium term. Some of these could be from synergies resulting from the BG deal. I’m also optimistic about oil prices, as reduced supply may allow demand to catch up this year.
Vodafone Group plc (LON:VOD) (LSE:VOD.L) and British American Tobacco plc (LON:BATS) (LSE:BATS.L) are two of my favourite defensive dividend shares. I think Vodafone’s business is becoming more diversified and I believe this will shore up its dividend in the long run. British American’s takeover of Reynolds should do likewise for its dividend payments. I think it will provide efficiencies and synergies which could improve payments to its investors in future. Vodafone yields 5.77% and shares in British American Tobacco yield 3.6%.
Direct Line Insurance Group PLC (LON:DLG) (LSE:DLG.L) yields 7.3% including special dividends. It’s therefore one of the highest-yielding shares I can find among large-cap stocks. I think Direct Line’s strategy is fairly sound and although its forecasts indicate a lack of profit growth over the next two years, its generous dividend payout ratio makes it a company I’m optimistic about from an income perspective.