Best British dividend stocks to consider buying in September

Every month, we ask our freelance writers to share their top ideas for dividend stocks with you — here’s what they said for September!

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BP

What it does: BP operates across the energy value chain, including production, refining, trading and retail.

By Andrew Mackie. The BP (LSE: BP.) share price may have been heading lower over the past few months, but I see nothing to change my bullish long-term view on the company.

In Q2, it hiked its dividend per share (DPS) 10% to 8 cents. Indeed, over the past three years, DPS has risen 52%. Despite these bumper returns, it still trades at a lowly forward price-to-earnings ratio of eight, one of the lowest in the sector.

Back in 2020, when oil prices turned negative, no one was interested in investing in oil. I believe it’s the same today. One of the main reasons is a lack of demand from China, the manufacturing plant of the global economy. But despite this, oil prices continue to remain buoyant. One reason is that demand is coming from a construction boom in the US, driven by onshoring of manufacturing capability.

A demand shock caused by a recession remains a clear short-term risk to the BP share price. Nevertheless, history shows that commodities businesses do well in inflationary environments. And despite the rhetoric from Central Banks, such as the Federal Reserve, the battle against inflation is, in my opinion, far from won.

Andrew Mackie owns shares in BP.

Howden Joinery

What it does: The UK’s leading manufacturer of fitted kitchens, bedrooms, and joinery products in the home renovation market.

By Zaven Boyrazian. Renovation hasn’t been at the top of most household priority lists of late. After all, with higher interest rates and inflation putting pressure on family budgets, it’s an expense that many have delayed.

Yet despite these headwinds, Howden Joinery (LSE:HWDN) has sucessfully retained its top and bottom line expansion from the lockdown market boom. Its latest results show revenue still 48% ahead of pre-pandemic levels on the back of new product launches, exercising pricing power, and optimising operations.

Growth has slowed. With many households waiting for lower interest rates before kickstarting their renovation projects, growth might be making a comeback in 2025. And margins remain some of the highest in the industry

Obviously, this all depends on how the economy behaves. The longer it takes for the Bank of England to significantly bring down rates, the longer Howden will have to operate in an unfavourable environment. And the firm may slowly run out of steam.

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Nevertheless, with ample cash on the books and a solid track record, it’s a risk worth taking, in my opinion.

Zaven Boyrazian owns shares in Howden Joinery.

NatWest Group

What it does: NatWest Group is a collection of banks, including NatWest, Coutts and RBS.

By Jon Smith. It’s not just the 55% gain in the share price over the past year that makes me want to buy NatWest Group (LSE:NWG) shares. The dividend yield is 5.06%, well above the FTSE 100 average.

Heading into the autumn, I think the stock could keep doing well. This is because I expect two more interest rate cuts from the Bank of England this year. Some would say this is a risk for the bank, as it will squeeze the net interest margin.

Although this is true, I expect the negative impact to be outweighed by the increase in business done with new loans and mortgage products. The group has a large retail, private wealth and corporate division. With lower interest rates, demand for cheaper personal and business loans should increase significantly. This should provide the group with higher revenue, supporting future dividend payments.

Jon Smith does not own shares in NatWest Group.

Pets at Home

What it does: Pets at Home sells pet products online and through a UK chain of pet superstores, many of which also offer vet and pet care services.

By Roland Head. A 2023 survey by UK Pet Food found that 57% of UK households had a pet, up from 40% in 2019.

All these extra pets need feeding and caring for. I believe Pets at Home (LSE: PETS) offers a strong opportunity for UK stock market investors to profit from this growth in demand.

Annual sales have risen by 50% to £1.5bn since 2019, while operating profit has more than doubled to £119m, for the year ended 31 March 2024.

I think the company’s integrated offer will help it to win further market share.

One risk is that an ongoing competition investigation into vet groups could hurt Pets’ pricing power. However, I reckon this is largely priced in.

Pets at Home’s share price has fallen 40% from its 2021 peak of 500p.

The shares now trade on 13 times forecast earnings, with a 4.6% dividend yield. I see this as a decent buying opportunity.

Roland Head has no position in Pets at Home.

Primary Health Properties

What it does: Primary Health Properties leases GP surgeries in the UK and Ireland, primarily to government organisations.

By Stephen Wright. Interest rates have started to come down in the UK. And I think real estate investment trust (REIT) Primary Health Properties (LSE:PHP) stands to benefit in quite a big way.

With the vast majority of its rent coming from national governments, the risk of defaults is minimal. And demand for its buildings should be durable as life expectancies increase over time.

These features give Primary Health Properties good earnings visibility into the future. And the company has used this to take a significant amount of debt onto its balance sheet.

That’s the biggest risk with the business at the moment. If the firm has to refinance its debt at higher rates, the dividend could come under pressure.

Lower interest rates decrease the chance of this happening, though. And with the share price already starting to rally from its lows, I’m looking to buy the stock while there’s still a 6% dividend on offer.

Stephen Wright owns shares in Primary Health Properties.

The post Best British dividend stocks to consider buying in September appeared first on The Motley Fool UK.

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The Motley Fool UK has recommended Howden Joinery Group Plc, Pets At Home Group Plc, and Primary Health Properties Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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