Three top dividend ideas for August

best dividend stocks August 2017

While the FTSE 100 is still at a high level of 7400 points, many stocks are trading well below their recent highs are present. As such, dividend opportunities are emerging. Here’s a look at three dividend stocks I like right now.

National Grid

National Grid (LON: NG) (NG.L) shareholders have endured a rollercoaster twelve month period. The stock surged higher to above 1,100p last year after the Brexit result, before plummeting below 900p when Donald Trump was elected as US President in October. The utility giant then enjoyed a strong run during first half of this year, touching 1,100p again, before dropping like a stone in late May after the general election result.

At the current share price of around 945p, National Grid now sports a dividend yield of 4.7% and City analysts current forecast a payout of 47.5p for FY2018, taking the forward looking yield to 5.0%.

National Grid has a solid track record of regularly increasing its dividend, and while growth going forward is unlikely to be prolific, the company has said it plans to increase its dividend in line with RPI inflation for the foreseeable future. That’s a positive for income investors living off their dividends. Forecast dividend coverage is a little on the low side at 1.32 times, but not at a crisis level, and on a forward P/E ratio of 15.0, the stock looks reasonably valued.

WPP

Another stock that is well off its highs is advertising behemoth WPP (LON: WPP) (WPP.L).

The company was cautious in its outlook in March, and this combined with a cyber attack and a broker downgrade in June, has seen its share price fall from over 1,920p to 1,545p today – a decline of around 20%.

I’ve been patiently waiting for a pull back here, because I’m attracted to the long-term story. WPP has a significant exposure to digital advertising, and also to fast growing economies China and India.

The company also boasts an enviable dividend growth track record, having increased its dividend from 24.6p to 56.6p over the last five years. At the current share price, WPP’s forecast yield for this year is 4.1% with a dividend coverage ratio of 2.0.

I took the opportunity to buy a position in the company last week.

Legal & General Group

Lastly, I like the look of Legal & General Group (LON: LGEN) (LGEN.L) right now.

While the stock hasn’t endured a correction like the two stocks above, I believe the insurer is still attractively valued at a share price of 270p, as the forward looking P/E ratio is just 12.2.  And the company’s yield is excellent at 5.3%, forecast to grow to 5.7% this year.

Legal & General has grown its dividend by a compound annual growth rate of 16% over the last three years, and with coverage of an adequate 1.5 times last year, the insurer could be one of the best dividend stocks in the FTSE 100 at present, in my view.

Disclosure: Edward Sheldon, CFA owns shares in WPP and Legal & General Group. 

This article is provided for general information only and is not intended to be investment advice. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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