Dividend Investing Guide 2024

Jitanchandra Solanki
12 Min read

Dividend investing is a popular investment strategy. Dividends are paid out to shareholders from publicly traded companies as a way to share in the profits a company makes. The aim for dividend investors is to build a portfolio of dividend-paying shares that can be used as an income stream. 

Learn more about the pros and cons of dividend investing UK and how to start building a portfolio of dividend shares in this article. 

What is Dividend Investing UK

Investors who own shares of publicly listed companies can earn profits from an increase in the share price and by the collection of dividends. A dividend is a portion of the profit that a company distributes among its shareholders.

What is dividend investing? Dividend investing is a strategy that involves building a portfolio of dividend-paying shares. Investors will do this in order to try and receive a regular income from the dividend payments a company pays out.

A company's board of directors will determine whether a dividend will be paid and how much it will be. The payment must then be approved by the shareholders via a vote.

The remainder of the profits are usually used for investments by the company's management. This means that, in general, companies that focus on growth (such as those in the technology sector) tend to pay a lower proportion of their profits as dividends than companies in a more mature industry that focuses on stability. 

When are Dividends Paid UK

When are the dividend payment dates? Dividends are usually paid semi-annually, although some companies pay them quarterly and others annually. There are some companies that will also pay monthly dividends, which may be more interesting for those seeking dividend investing returns on a more regular basis. 

As well as determining a percentage of profits to allocate to dividend payments, the board of directors will also set a "record date". This is the date when the company will look at its share register to determine who its shareholders are and, therefore, who is eligible for the dividend payment.

In order to qualify for the dividend payment, investors must be registered shareholders on the record date. There is a lag of a few days between the time that shares are traded and the update to the share register. This means that it is necessary to actually purchase shares at least two business days prior to the record date to ensure you are registered in time. This date is known as the "ex-dividend date" and it indicates to possible investors that if they have not purchased shares before this date, they will not qualify for the scheduled dividend payment.

Because of this, shares will usually fall in value on the ex-dividend date by the amount being paid in that dividend. For example, assume Company X is due to pay £1 in dividends and the ex-dividend date is tomorrow, if its shares end the trading day today at £25, then tomorrow's official opening price will be £24.

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The Different Types of Dividends

There are several types of dividends which exist:

  • Cash Dividend
    • This is by far the most common method of making dividend payments. As the name implies, the company pays the value of the dividends to its shareholders in cash
  • Stock Dividend
    • If a company lacks operating cash, it may choose to issue additional shares to shareholders, who receive these "bonus shares" proportionately based on the amount of shares they hold
    • The company does this by increasing the number of outstanding shares in the company, similar to a stock split
  • Property Dividend
    • As with a stock dividend, property dividends may be issued when a company lacks sufficient operating cash to pay a cash dividend. This type of dividend is paid in the form of physical assets which are no longer needed by the company
  • Scrip Dividend
    • In this circumstance, the company issues a promissory note to shareholders which confirms the payment of a dividend on a future date. This promissory note may be interest-bearing but does not have to be.
    • This scenario may occur when the company requires additional time to convert current assets into cash
  • Bond Dividend
    • A bond dividend is very similar to a scrip dividend but has a maturity (or payment) date which is further in the future. These bonds are always interest-bearing
  • Liquidating Dividend
    • This last type of dividend occurs when the company pays back the original capital investment of the shareholders and is generally seen as a precursor to the business shutting down

The board of directors decide what percentage of profits will be paid to shareholders as dividends as well as the way in which they will make the dividend payment. They then submit the proposal to a vote at the Annual Shareholders Meeting.

How to Identify the Best Dividends Stocks for Investing

The dividend yield shows how much a company pays out in dividends each year in relation to its current share price and is, therefore, a very important factor to consider when dividend investing. In order to calculate the dividend yield, we must divide the annual dividend per share by the current share price and then multiply the answer by 100.

For example, Company A has paid a total dividend of £0.25 per share over the last 12 months and its current share price is £6.85. Dividend yield of Company A = (0.25 / 6.85) * 100 = 3.65%. This means an investor will receive a 3.65% return on their capital annually (not including any capital gain or loss from the share price).

5 Top FTSE Dividend Paying Stocks

Below are five of the top dividend-paying stocks from the FTSE 100 which is an index of the largest 100 shares listed on the London Stock Exchange. 

  Stock Sector Dividend Yield
1. Phoenix Group Holdings Life Insurance 11.58%
2. Vodafone Telecommunications 10.24%
3. M&G Investment Banking 10.10%
4. British American Tobacco Tobacco 9.43%
5. Legal & General Group Life Insurance 9.37%

Source: DividendData

How to Start Dividend Investing Today

With Admirals, you can buy stocks and collect dividend payments in UK, US and European stocks with competitive commissions of: 

  • UK stocks – 0.1% of trade value, 1 GBP minimum commission
  • US stocks – From $0.02 per share, 1 USD minimum commission
  • Germany and France stocks - 0.1% of trade value, 1 EUR minimum commission

You can learn more about investing commissions on the Admirals Contract Specification page. You can search for global stocks and ETFs from the Invest.MT5 web platform and invest in just four steps:

  1. Open an account with Admirals to access the dashboard.
  2. Click on Trade on one of your live or demo accounts to open the web platform.
  3. Search for your stock in the search window at the top right to view the live price chart. 
  4. Click Create New Order from the bottom of the screen to open the trading ticket. 
Source: Example of a chart and trading ticket from the Trade.MT5 web trading platform. Illustrative purposes only. 

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Dividend investing can help investors build another income stream from their investments. While a share price will fall and rise, some companies will continue to pay out a share of the profits to their shareholders in the form of dividends. Of course, the dividend amount can change over time as businesses need to adapt to changing conditions. You can build a portfolio of dividend-paying stocks with the Admirals Invest.MT5 account. 

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FAQs on Dividend Investing UK


What is a dividend?

A dividend is a regular payout to shareholders from a public company's profits. While not all companies pay a dividend, many public companies share a slice of the profits with their shareholders in the form of dividend payouts. Investors can use this as an income stream or use it to purchase more shares.


What is dividend investing?

Dividend investing is the aim to build a portfolio of stocks that pay out regular dividends which can be used as a form of income or reinvested to buy more shares. Publicly listed companies often pay out dividends to shareholders as a way to share in the profits the company is making. 


How to start dividend investing?

To start dividend investing you need to have a stockbroker that provides access to a wide range of shares at competitive commission. Then, the research begins by identifying top dividend stocks which can be researched online. A common metric to find the best dividend shares is to identify the stocks with the best dividend yield. 


Is dividend investing a good strategy?

Dividend investing can be a good strategy as the dividend payouts can be used as an income stream or to reinvest and buy more shares. With any form of investing, there is the inherent risk that the company's share price you invest in will also fall so that needs to be factored in as well. 


When will the next BT dividend be paid?

The next BT dividend payment dates are forecasted for 5 February 2024 and 11 September 2024. 


When is the next AstraZeneca dividend paid?

The next AstraZeneca dividend payment dates are forecasted for 25 March 2024 and 9 September 2024. 


About Admirals

Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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