3 world-class dividend shares to consider before the next bull market
The Bank of England’s recent decision to cut interest rates to 4.25% may hurt cash savers, but it could make dividend shares more attractive. A combination of low valuations and high yields suggests a bullish outlook for many UK stocks as monetary conditions loosen.
I’ve got my eye on three elite FTSE 350 dividend stocks that appear well-positioned to outperform in the next big bull run. Here’s why they’re worth considering today.
HICL Infrastructure
FTSE 250 investment company HICL Infrastructure (LSE:HICL) is first on my list. It offers a mighty 7.1% dividend yield.
The firm’s portfolio covers many essential public assets, with 65% concentrated in Britain. Examples include rail links, water treatment facilities, and hospitals. Infrastructure companies often benefit from lower interest rates since investors look for other stable, long-term opportunities when bond yields slump.
Having fallen 31% over five years, HICL Infrastructure’s share price trades at a 25% discount relative to the portfolio’s net asset value. If the gap narrows in a kinder macroeconomic climate, shareholders could enjoy a greater total return than the portfolio implies.
This opportunity should be weighed against low dividend cover of one times forecast earnings. Ideally, I’d want this to be twice as large for a comfortable margin of safety. However, a bumper yield and inflation-linked cash flows make the risks tolerable in my view.
Persimmon
The next dividend share to consider is FTSE 100 housebuilder Persimmon (LSE:PSN), which has a healthy 4.5% yield.
As borrowing costs for projects fall and mortgage affordability improves, homebuilder stocks could reap the rewards. Major planning reforms presently working their way through Parliament should also provide additional support to the sector. In this context, there are good reasons to believe the Persimmon share price can keep building on its 15% gain in 2025 thus far.
A stagnant UK economy remains a key risk for the company, especially if it translates into suppressed demand for new homes. In addition, unanticipated inflationary shocks can’t be ruled out, which could put pressure on margins.
But the positives shouldn’t be overlooked. Persimmon’s balance sheet is debt-free, providing robust support for the dividend. Moreover, a considerable land bank means it’s primed to capitalise on any long-term benefits from the government’s housebuilding drive. I reckon the budding recovery in Persimmon shares could have legs.
Sainsbury’s
My final dividend idea is another FTSE 100 share. Supermarket group J Sainsbury (LSE:SBRY) offers a tasty 4.9% yield for investors to chew over.
Sainsbury’s is holding its own in a cutthroat sector. In its FY25 results, the supermarket delivered its largest market share gain in a decade. Additionally, a 4.2% rise in sales to £26.6bn shows business is ticking along nicely. Shareholders will also benefit from a £200m share buyback and a £250m special dividend this year, bolstering the investment case.
Competition risks are the stand-out threat. German discounters Aldi and Lidl are pursuing a UK expansion drive, and ASDA’s ramping up a price war to attract customers away from its rivals.
Nonetheless, the board had sufficient confidence to restate its guidance for this year. Expected underlying profit of £1.1bn would match last year’s figure, and anticipated free cash flow above £500m should give passive income seekers a reason to be cheerful.
The post 3 world-class dividend shares to consider before the next bull market appeared first on The Motley Fool UK.
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Charlie Carman has no position in any of the shares mentioned. The Motley Fool UK has recommended J Sainsbury 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.
