UK Top 40 Quality Dividend Stocks: Summer 2024

Welcome to the summer 2024 edition of the UK Top 40 Quality Dividend Stocks list.

As I'm sure you're aware (unless you've been hiding under a rock on the dark side of the moon), the UK is about to hold another general election, and although this is important to me as a citizen of the UK, it isn't all that important to me as an investor.

That's because I'm a long-term investor, which means I expect to hold each investment for at least five years, and often much longer. Over that sort of timeframe, the actions and policies of any one government become less important, and it becomes more important to invest in companies that can succeed regardless of which party is in power at any specific moment in time. 

And, as Forest Gump once said, that's all I have to say about that.

Turning back to the topic of dividend stocks, the good news is that the UK remains an attractive market for dividend investors, with the FTSE 100 (at 8,100) offering a dividend yield of 3.8% and the FTSE 250 (at 20,200) offering a dividend yield of 3.4%. Even better, the average yield across the UK's top 40 progressive dividend stocks (listed below) is a very healthy 4.6%.

That's a lower yield than you can get from a savings account (where yields for fixed-term accounts are still close to 5%), and that's why a lot of people are choosing savings accounts when they're revisiting the age-old dividends vs savings question.

But don't forget that companies usually retain some of their earnings to fund expansion and growth, so dividends have (on average) grown ahead of inflation over the medium and long term, while the income from a savings account is typically fixed and unchanging. And with inflation still somewhat elevated, this is an important factor to consider.

Unfortunately, UK investors have had to suffer weak or negative capital gains in recent years to get those high yields. Alas, this is the inevitable double-edged sword of investing, where you can rarely have high income and high growth at the same time. It's almost always one or the other, with the US currently seeing a lot of growth and very little income, while the UK is producing quite a lot of income with not so much growth.

It's a case of horses for courses and, as an income-focused investor, I'm sticking with the UK.

Last but not least, I should also mention that I'm working on a review of BAE Systems, which is in 14th place on the top 40 list and has seen dramatic share price gains since Russia invaded Ukraine. I'm hoping to publish that review at some point in July and, in the meantime, here are the UK's top 40 quality dividend stocks.

Notes:

1. The data for this list is kindly provided by SharePad
2. If you're reading this in the future, you can download the latest version of the list in PDF format here: UK Top 40 Quality Dividend Stocks
3. This list is a starting point for further analysis and is not a recommendation to buy or sell any specific stock

Here's a summary of the sort and select rules used to build the list:

Select stocks that:

1. Are constituents of the FTSE 100, FTSE 250, FTSE Small-Cap, FTSE Fledgling or AIM UK 50 indices
2. Paid a dividend every year for the last ten years
3. Held or raised their dividend in every one of the last ten years

Sort those stocks by:

1. Size: Assign each stock a size rank, with the highest market cap having a size rank of 1
2. Yield: Assign each stock a yield rank, with the highest yield having a yield rank of 1
3. Size and Yield: Sum the size and yield rank for each stock; sort the list by the combined rank in ascending order so the stock with the best combination of large size and high dividend yield is at the top of the list
4. Top 40: Remove stocks outside the top 40