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UK dividend stocks: a guide to understanding dividend investing in 2025
Dividend stocks can provide a great opportunity to increase the income diversification of your portfolio, as select companies will give out a regular percentage of their earnings to loyal shareholders. This article explains how they work, the advantages and disadvantages they offer, and we provide a list of the best FTSE dividend stocks by yield (excluding special dividends) that are listed on the London Stock Exchange. This information is up to date as of February 2023.
Please note that past performance is not a reliable indicator of future results.
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Dividends are a form of reward to shareholders for investing in the company
They are most often paid on a quarterly basis, although some companies choose to issue monthly payouts
Many of the top payouts come from the UK’s biggest companies within the energy, financial and consumer goods sectors
With derivative trading, you won’t receive payouts as you don’t own the stock
If you open buy or sell positions at an opportune moment through spread bets or CFDs, you may receive or pay a dividend adjustment depending if you are long or short, which should not have any positive or negative impact on your account value
What are the 15 highest dividend stocks in the UK?
Company | Dividend yield | Dividend per share |
|---|---|---|
Legal & General | 7.23% | 21.91p |
abrdn | 6.68% | 14.6p |
M&G | 6.47% | 20.6p |
Standard Life (formerly Phoenix Group) | 6.11% | 56.1p |
Imperial Brands | 5.70% | 163.52p |
Aviva | 5.62% | 40.2p |
Rio Tinto | 5.58% | 465 US cents |
British American Tobacco | 5.44% | 245.04p |
Taylor Wimpey | 5.32% | 4.15p |
Persimmon | 4.61% | 60p |
BT | 3.90% | 8.32p |
Vodafone | 3.25% | 4.6125 euro cents |
Barratt Redrow | 1.83% | 6p |
Antofagasta | 1.77% | 78 US cents |
Anglo American | 0.71% | 39 US cents |
1. Legal & General — 7.23%
Legal & General is a financial services company that provides pensions, lifetime mortgages, annuities and investments. It is headquartered in the City of London.
2. abrdn — 6.68%
abrdn is an investment company that manages assets including equities, real estate and private markets. It was formed in 2017 through the merger of Standard Life and Aberdeen Asset Management.
3. M&G — 6.47%
M&G is a London-based investment management company. It manages investments across areas including equities, fixed income and real estate.
4. Standard Life — 6.11%
Standard Life plc, formerly Phoenix Group Holdings, is a retirement savings and income provider. It changed its name from Phoenix Group and began trading under the ticker SDLF in March 2026.
5. Imperial Brands — 5.70%
Imperial Brands is an international tobacco and nicotine company. Its brands include Golden Virginia, Rizla and JPS.
6. Aviva — 5.62%
Aviva is a British insurance company focused on areas including pensions, savings, fund management and life insurance.
7. Rio Tinto — 5.58%
Rio Tinto is an Anglo-Australian mining company with operations around the world. It produces commodities including iron ore, copper, aluminium and minerals.
8. British American Tobacco — 5.44%
British American Tobacco sells tobacco and nicotine products. Its brands include Lucky Strike, Kent, Dunhill and Pall Mall.
9. Taylor Wimpey — 5.32%
Taylor Wimpey is a homebuilder operating in the UK and Spain. Its developments include homes ranging from apartments to larger family houses.
10. Persimmon — 4.61%
Persimmon is a UK housebuilding company headquartered in York. It operates through regional businesses and builds homes across the UK.
11. BT Group — 3.90%
BT Group is a UK telecommunications company providing broadband, mobile and other communications services.
12. Vodafone — 3.25%
Vodafone is a telecommunications company providing mobile and fixed network services across multiple markets. dividenddata.co.uk
13. Barratt Redrow — 1.83%
Barratt Redrow is a UK housebuilder and property developer. It builds and sells homes to customers across the UK.
14. Antofagasta — 1.77%
Antofagasta is a copper mining company based in Chile, with its headquarters in London. It also has interests in rail and road transport.
15. Anglo American — 0.71%
Anglo American is a mining company with operations and projects across several countries. Its products include copper, iron ore, platinum and diamonds.
What do these types of shares offer?
They may sound appealing so far, but exactly what are dividend stocks?
This term describes companies that regularly share profits with their shareholders. While most companies just make (or lose) traders’ money on their market performance, others can give their shareholders a regular payout of cash, or further shares. This both rewards the shareholders for their support and sends a signal from a successful company to attract more investors.
The payout typically happens four times a year following the company’s quarterly earnings statement. However, because it’s based on profits, the amount is not guaranteed, and in poor-performing quarters, it may not be paid at all.
How much a company will pay is determined by the board of directors, who will consider the previous year’s profit and losses, and then come to a decision on what amount they can afford to pay out to the shareholders and what must be reinvested. Some firms choose to pay very low dividends to their shareholders to be able to retain most of their profit and concentrate on the growth of the company, whereas high dividend stocks may attract more investor attention if they are in slow growth industries, such as consumer staples or real estate.
Another way companies deliver value back to their shareholders is via share buy backs, which is akin to a dividend but instead of a pay-out per share the company uses their profit to buy back shares in the open market, which reduces the supply of shares, in turn boosting the stock price for the existing shareholders.
How to calculate dividends
Work out the company's net income. This is usually found on its financial statements.
See how many shares are outstanding. This number can be found on the company’s balance sheet.
Divide the net income by the number of shares outstanding. The result will give you the earnings-per-share (EPS).
Alternatively, you can use the company's payout ratio. Use the midpoint of historical dividend payouts as the typical ratio and multiply this by net income per share to calculate dividend per share.
Find the dividend yield. Divide the annual dividend per share by the company's share price to get a percentage, which is the yield.
Dividend yield = annual dividend per share / company share price
It’s important to note that a stock’s yield should not be considered to be set in stone, as it can fluctuate due to stock price movements within the market, or from the companies changing the value of their pay-outs. Their value may change on a weekly or even daily basis, so it is important to do your due diligence and check to see if this is occurring frequently before blindly opening positions on stocks with the highest dividends.
Do you get paid dividends when trading derivatives?
While trading derivative products (such as spread bets or CFDs) mean that you don’t get the dividend from the share itself — because you don’t own it — you receive or pay an adjustment, as long as you have bought or sold at the right time.
In each quarter is a date of record, in which companies check and confirm their lists of shareholders. The day before this is known as the ex-dividend date, a cut-off point when the right to dividends passes from the seller to the buyer. To be eligible for the next yield, you must buy the stock and own it by the close of trading one business day before the ex-dividend date. If you buy on the ex-dividend date or later, the seller will receive the next dividend and you will not be eligible to receive any until the following quarter.
How do adjustments work?
Share prices can be impacted by corporate actions, which in this case means when the company pays out to its shareholders. When a stock goes ex-dividend, the value of that stock effectively falls by the dividend amount, and therefore impacts any spread bet position you hold in that company.
If you have gone long (bought with the intention of selling higher), this payout will have reduced your position, so we would credit your account with the dividend amount. If, on the other hand, you had shorted the stock (sold with the intention of buying back cheaper) you would have benefited from the drop in the price. As a result, the equivalent amount would be deducted from your account, which means you don’t lose or gain anything from the adjustment.
How to find the right stocks
Dividend shares that deliver consistent growth are, unsurprisingly, very popular — but choosing the right ones still needs careful thought. Even the best dividend stocks are vulnerable to cuts, missed payments, dividend elimination and share price crashes. When choosing stocks, you should consider the following.
Profitability
Income stocks should show year-on-year consistent profitability, as a financially stable company is inevitably more likely to pay out a regular yield and there are unlikely to be cuts or payout problems in the future.
Payout ratios
This represents the relationship between a company’s income and its dividends, so these should usually show a positive correlation. By comparing these metrics, you can start to establish if the current rate is sustainable. For example, companies with a high payout ratio yet declining profits may pressure themselves to continue to pay that level of dividend to prevent investors from going elsewhere.
Dividend coverage ratio
This is a helpful figure in determining a company’s capacity to pay dividends out of its profit in any given period. It demonstrates how many times the company could pay out (cover) its yield with the profits available.
Dividend cover = earnings per share (EPS) / dividend per share (DPS)
A ratio above 1.0 is considered healthy, although many companies aim for a cover of 2.0 to ensure they use their capital efficiently and sustainably. Any ratio less than 1.0 suggests the current payouts are not sustainable and the dividend may be at risk of being cut.
Dividend volatility
Looking at a company’s previous profits and dividend information can be a reliable indicator of the stock’s volatility. If a stock has a history of paying high yields on time and consistently increasing the dividend, it can be classified as a stable income stock. Although slow and steady growth may not be exciting, combining the reinvestment of dividends and compound interest can provide great returns.
Dividend growth
Stocks that pay a high yield do not necessarily mean the company is doing well. A more reliable indicator is whether the company’s EPS is growing. Therefore, it is necessary to look at more than just dividend growth when assessing a company’s performance.
Where can I get started?
Open an account. A demo trading account allows you to spread bet or trade CFDs on our full product library of stocks. You are able to transfer to a live account and add funds via bank card, bank transfer or PayPal once you feel ready.
Use our exclusive stock research tools. We offer Morningstar equity reports and a live Reuters news feed to keep you up to date with market news and inform your trading efforts.
Find the right stocks for you. You should spend a considerable amount of time investigating the stocks you wish to trade, as you may want to hold these for several days, weeks or even months.
Manage your risk. Before placing your trade, make sure you have followed risk-management guidelines as part of your strategy, such as adding stop-loss controls.
Monitor your position. Depending on how the stock performs over time, you may wish to buy more or sell the stock if it is no longer serving the purpose that you purchased it for.
There is no universal answer. Context matters significantly. Yields on UK large-cap stocks typically range from 2% to 6%, though considerable variation exists. A yield substantially above the market average warrants investigation into why. Very high yields often reflect share price declines signalling expected dividend cuts.
Compare yields within sectors rather than across the entire market. What constitutes normal varies by industry.
Companies announce dividend declarations, including the ex-dividend date, record date and payment date. The ex dividend date UK shares carry typically falls one business day before the record date. You must own shares before the ex-dividend date to receive the payment.
Company investor relations pages, financial news services and broker platforms publish this information. Payment dates usually follow ex-dividend dates by several weeks.
No. High yields sometimes indicate distress rather than generosity. When share prices fall sharply, yields calculated on historical dividends appear artificially high. The subsequent dividend may be cut to reflect the company’s deteriorated position.
Sustainable moderate yields often prove more valuable than unsustainable high yields that subsequently disappear.
No dividend is safe or guaranteed, so it is more useful to apply criteria than to rely on a fixed list. Investors commonly look for dividend cover of comfortably more than one times earnings, free cash flow that funds the payment without new borrowing, manageable debt and interest costs, stable or defensive revenues, a long record of maintained payments and a clearly stated dividend policy. Spreading holdings across sectors reduces reliance on any single payer.
Dividends above the annual dividend allowance (currently £500) are taxed at rates linked to your income tax band. Dividends from shares held inside a stocks and shares ISA are shielded from income tax, subject to the annual contribution limit, currently £20,000. Tax treatment depends on your individual circumstances and is subject to change; consider speaking to a qualified tax adviser.
Monthly payments are uncommon among individual UK companies, which usually pay semi-annually or quarterly. Monthly distributions are more often found among investment trusts and some REITs, which collect income from underlying assets and pass it on regularly. Frequency should not outweigh the quality and sustainability of the underlying income.
