Three top dividend stocks for July

Top dividend stocks July

The FTSE 100 has pulled back marginally in the last month or so, and as a result I’m starting to see a little more value emerging from a dividend investing perspective. With that in mind, here’s a look at three dividend stocks I like at the moment.

Close Brothers

I’ve had Close Brothers (LON:CBG) (CBG.L) on my watchlist for some time now, and I believe a recent pull back in the share price may have created an opportunity for dividend investors.

The merchant bank released a positive trading statement in May, stating “the group continued to perform well in the quarter, with strong profitability across all three divisions.

The stock has enjoyed a strong run since the Brexit vote last year, rising from under 1,000p to trade at over 1,700p in May. However, the share price has fallen back to just over 1,500p recently and at that price, I believe value is beginning to emerge.

Close Brothers has an excellent dividend growth record, increasing its dividend consistently over the last five years from 40p per share in FY2011 to 57p last year. That equates to a trailing yield of 3.8% at the current share price and analysts expect growth of 4.7% this year which would take the yield to approximately 4%. Dividend coverage last year was 2.3 times.

Trading on a forward looking P/E ratio of 11.8, Close Brothers looks to have strong potential as a quality long-term dividend growth stock in my opinion.

Aviva

Sticking with financials, I also like the look of Aviva (LON:AV) (AV.L) at present.

Aviva paid out dividends of 23.3p last year, which at the current share price equates to a strong yield of 4.4%. Analysts forecast a payout of 26.2p for this year, giving a forward looking yield of 5.0%.

There’s also been rumours of a special dividend, with analysts at Credit Suisse suggesting a special dividend could be paid as early as this year.

While dividend coverage last year was concerning, at just 0.66, earnings of 53.6p per share are forecast this year, which would take the coverage ratio back up to a much healthier 2.0 times.

On a forward looking P/E ratio of 9.8, the valuation looks attractive.

Imperial Brands

Lastly, I believe tobacco manufacturer Imperial Brands (LON:IMB) (IMB.L) offers a fantastic dividend opportunity right now.

Profitability concerns have seen Imperial’s share price fall from above 4,100p in August last year to under 3,500p now, and at the current share price, the stock yields a robust 4.5%.

The company has increased its dividend by an impressive 10% per year for the last eight years now, and recently stated that it was “committed to this size of increase in the medium term.”

On a forward looking P/E ratio of 12.8 vs 18.4 for rival British American Tobacco (LON:BATS) (BATS.L), Imperial appears to offer a healthy yield, with strong growth at a very reasonable valuation.

Disclosure: Edward Sheldon, CFA owns shares in Aviva and Imperial Brands.  

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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