UK Top 40 Quality Dividend Stocks: 2024 Q2

I first started publishing and updating a list of the top 40 UK dividend stocks in 2022 and, so far, I think it's done what I intended: to provide investors with a simple and free starting point for identifying potential investment candidates.

However, the list has received fairly regular criticism that it puts too much weight on high dividend yields, and that's a criticism I readily accept. The list ranks stocks based on their market cap and dividend yield alone, but in practice, I certainly don't invest in stocks just because they have a high yield; they're usually the first stocks to cut or suspend their dividend and that's not what I'm looking for.

What I am looking for is quality dividend stocks with long track records of progressive dividend growth, and while dividend yield is still important, it's a secondary consideration.

So, there is something of a mismatch between the type of stocks I like to invest in (quality dividend stocks) and the type of stocks that dominate the top of the top 40 list (high-yield dividend stocks), and that's why I've decided to update the list's selection and sorting rules from today.

I'll detail the new rules at the bottom of this blog post, but here's a quick summary:

• Selecting
  • The list now only includes stocks from the FTSE All-Share and AIM UK 50 indices that have at least a ten-year record of progressive dividend growth (holding or raising their dividend every year)
  • Stocks are only included if the consensus forecast is for a maintained or increased dividend next year (so high probability dividend cutters are excluded)
• Sorting
  • Selected stocks are sorted by a combination of market cap and dividend yield so that the highest-ranked stocks are those with the best combination of large size (as these tend to be more robust than smaller companies) and high yield (as this is important for most dividend investors)

Data for this list is kindly provided by SharePad.

Compared to the previous rules, these are far more reflective of the kind of high-quality progressive dividend stocks I like to invest in, and I'm looking forward to reviewing and learning from this collection of companies over the coming months and years.

If you'd like to investigate any of these companies yourself, feel free to use my dividend investing tools.

Here are the new sort and select rules in a bit more detail:

Select stocks that:

1. Are constituents of the FTSE All-Share 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
4. Have a consensus forecast for a held or raised dividend next year

Sort the selected 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 any stocks outside the top 40

You can also download the latest version of the list in PDF format here: UK Top 40 Quality Dividend Stocks