British stocks boasting reliable and growing dividends

Economic development and UK stock market concept with UK's Union Flag and graphs

(Image credit: Getty Images)

The UK market is a renowned destination for dividend seekers, boasting a yield of just under 4%, which eclipses that of many other markets. However, the reliability of these payouts is not guaranteed. Five of the top eight dividend payers have cut their dividends in the past 15 years, with one company reducing its payout three times. Furthermore, 40% of the dividends in the index stem from cyclical sectors, which are susceptible to fluctuations in interest rates and commodity prices.

Our trust aims to provide a solid return in capital and income by investing in stocks with resilient and growing dividends. This strategy results in a concentrated portfolio of 36 firms that diverges significantly from the FTSE All-Share. We target high-quality companies, have a 20% allocation to leading European firms and are notably overweight in UK mid-caps. This approach has enabled the trust to sustain and grow its dividend for 42 consecutive years. Here are three stocks that meet the trust’s high standards.

Three British stocks with growing dividends

Softcat (LSE: SCT) provides IT hardware, software, and services to around 10,000 small and medium-sized firms across the UK. The company boasts an impressive 20-year record of achieving double-digit growth in gross profit. In today’s competitive landscape, IT spending is no longer optional for businesses; it is essential. Softcat has surpassed its competitors to become the market leader, thanks to its comprehensive product offerings and a unique corporate culture that fosters excellent customer service. Despite this success, Softcat holds only 5% market share, suggesting ample opportunity for future growth. It is cash-generative, operates with no debt and returns most of its earnings to shareholders through dividends. With solid fundamentals and a proven growth strategy, Softcat is purring with momentum.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Unilever (LSE: ULVR) is turning its fortunes around under new CEO Hein Schumacher. From Dove soap to Hellmann’s mayonnaise, the product range reaches 3.4 billion consumers daily. Schumacher’s plan to simplify and focus the business is showing results, with early signs of volume growth and margin expansion.

The company is committed to sustainability, aiming for reduced emissions and responsible sourcing practices, which enhances the brand’s reputation and supports its attractive 3.5% dividend yield. With a solid strategy in place and a renewed focus on innovation, Unilever offers a resilient prospective return.

National Grid (LSE: NG) is poised for a brighter future, driven by a supportive regulatory environment, a strengthened balance sheet and ambitious plans for investment. National Grid hopes to invest £60 billion over the next five years. With half of its operations based in the US, the company benefits from favourable regulatory returns that enhance its financial stability.

In the UK, electricity infrastructure needs to be upgraded to meet the rising demand for secure and low-carbon energy. Energy use is accelerating – data centres, for example, account for 1.8% of the UK’s electricity load, but this figure is projected to rise to 6% by 2030 - and new projects await connection to the grid.

National Grid’s UK operations are vital for the energy transition, with 80% of capital investment focused on enhancing electricity networks that connect wind-energy generation in Scotland to high-demand areas in the south. Collectively, these factors position National Grid to achieve double-digit asset growth and compelling earnings growth in the coming years. This trajectory supports an appealing yield and also offers inflation protection for investors looking for stability in an evolving energy landscape.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Co-manager, Dunedin Income Growth Investment Trust