In This Article:
When exploring dividend stocks in the United Kingdom, it's important to consider the sustainability of a company's dividend payments. A high payout ratio might initially appear attractive, but it can also signal potential financial strain and a risk to future dividends. This article will discuss two companies: one that may pose such risks due to its high payout ratio, Airtel Africa, and another that offers a more stable dividend prospect.
Top 10 Dividend Stocks In The United Kingdom
| Name | Dividend Yield | Dividend Rating |
| James Latham (AIM:LTHM) | 6.30% | ★★★★★★ |
| Epwin Group (AIM:EPWN) | 5.75% | ★★★★★☆ |
| Big Yellow Group (LSE:BYG) | 3.92% | ★★★★★☆ |
| Impax Asset Management Group (AIM:IPX) | 7.00% | ★★★★★☆ |
| Keller Group (LSE:KLR) | 3.48% | ★★★★★☆ |
| Plus500 (LSE:PLUS) | 5.70% | ★★★★★☆ |
| Grafton Group (LSE:GFTU) | 3.83% | ★★★★★☆ |
| Rio Tinto Group (LSE:RIO) | 6.17% | ★★★★★☆ |
| Hargreaves Services (AIM:HSP) | 6.82% | ★★★★★☆ |
| NWF Group (AIM:NWF) | 4.52% | ★★★★★☆ |
Click here to see the full list of 56 stocks from our Top Dividend Stocks screener.
We're going to check out one of the best picks from our screener tool and one that could be a dividend trap.
Top Pick
Drax Group
Simply Wall St Dividend Rating: ★★★★☆☆
Overview: Drax Group plc operates in renewable power generation in the United Kingdom, with a market capitalization of approximately £2.07 billion.
Operations: The company's revenue segments include £4.96 billion from customers, £6.79 billion from generation, and £822.40 million from pellet production.
Dividend Yield: 4.3%
Drax Group's dividend sustainability is evident with a low earnings payout ratio of 16.2% and a cash payout ratio of 22.7%, ensuring dividends are well covered by both profits and cash flows, despite its unstable dividend track record over the past decade. Recent board changes, including the appointment of Rob Shuter with extensive financial expertise, may influence strategic directions positively. However, earnings are expected to decline significantly in the next three years, which could challenge future dividend growth and stability.
-
Take a closer look at Drax Group's credentials here in our dividend report.
-
Upon reviewing our latest valuation report, Drax Group's share price might be too pessimistic.
One To Reconsider
Airtel Africa
Simply Wall St Dividend Rating: ★★☆☆☆☆
Overview: Airtel Africa Plc operates in providing telecommunications and mobile money services across Nigeria, East Africa, and Francophone Africa, with a market capitalization of approximately £4.42 billion.
Operations: The company generates revenue primarily through mobile services and mobile money, with segments totaling $4.34 billion and $0.84 billion respectively.