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Highlights
- Dividend stocks are more reliable than growth stocks as they help investors to create a sizable passive income stream.
- Dividend stocks can be held in the investor’s portfolio forever and can even be passed on as inheritance.
- Factors like profitability, stable cash flows, higher dividend yields, and low business risk should be considered to choose long-term stocks.
Dividends are the share of profits that are distributed by companies among their shareholders, and it is a great source of regular income for people who believe in stock investments. Even though dividend payments don’t seem to be very significant in the short run, they can potentially make up for a substantial proportion of the total returns from your stock market investments in the long run.
Dividend stocks offer many advantages over others, which include the generation of a sizable passive income stream that can grow by reinvestment through the process of compounding as well as provide protection to the investors during the times of market volatility as they generally fall less than growth stocks during these periods.
A wide range of factors and parameters must be taken into account while evaluating the strength of a company or its stocks. Thus, dividend investors should essentially carry out meticulous research to get a fair idea of the financial status, competitive standing, growth path and management efficiency of the company. Enormous growth can be attained by the investor’s portfolio by adding high-yield dividend stocks to it, but it is important to make sure that the stocks are reliable and that the stocks aren’t bought only on the basis of higher dividend yield. All factors should be simultaneously considered to maximise the risk-adjusted returns from dividend stocks.
Investments in stocks can be made at any age but the type of stocks in the portfolio should keep changing with age and priorities. Older investors generally go for dividend stocks as they are more risk-averse but financial advisors generally recommend investors to start with stock investments early to reap the maximum gains in future. Like older investors, young investors can also go for dividend stocks, hold them forever in their portfolio, or even pass them on as inheritance to their children or grandchildren.
RELATED READ: Dividends are back: Top 5 UK lenders to pay £7 bn
Let’s take a look at some of the UK dividend stocks you can buy and hold forever.
Rio Tinto plc (LON: RIO)
Rio Tinto plc is the second-largest metals and mining corporation after BHP. Its current market cap stands at £62,868.69 million and it has given a return of 7.65% in 1 year. Its average dividend per share stands at GBP 7.78 and its 5-year average dividend yield is 5.5%. The previous close price of Rio Tinto plc’s shares was GBX 5,002.00 as of 18 October 2021.
Persimmon plc (LON: PSN)
Persimmon plc is a UK-based housebuilding company with current market cap of £8,478.49 million and it has given a return of 5.86% in 1 year. Its average dividend per share stands at GBP 2.35 and its 5-year average dividend yield is 7.6%. The previous close price of Persimmon plc’s shares was GBX 2,657.00 as of 18 October 2021.
RELATED READ: 5 stocks you can hold in your portfolio forever
British American Tobacco PLC (LON: BATS)
British American Tobacco PLC is a leading cigarette manufacturing brand in the world. Its current market cap stands at £52,282.35 million and it has given a negative return of 2.29% in 1 year. Its average dividend per share stands at GBP 2.18 and its 5-year average dividend yield is 5.7%. The previous close price of British American Tobacco PLC’s shares was GBX 2,583.50 as of 18 October 2021.
BHP Group PLC (LON: BHP)
BHP Group PLC is a global resources company, and its current market cap stands at £41,979.54 million and it has given a return of 21.46% in 1 year. Its average dividend per share stands at GBP 2.10 and its 5-year average dividend yield is 5.2%. The previous close price of BHP Group PLC’s shares was GBX 1,987.60 as of 18 October 2021.
Imperial Brands PLC (LON: IMB)
Bristol-headquartered Imperial Brands PLC is a world-class tobacco company. Its current market cap stands at £14,730.84 million and it has given a return of 18.37% in 1 year. Its average dividend per share stands at GBP 1.40 and its 5-year average dividend yield is 8.4%. The previous close price of Imperial Brands PLC’s shares was GBX 1,556.50 as of 18 October 2021.
RELATED READ: 7 FTSE companies that reinstated dividends this year
