Receiving passive income from the stocks I hold is one of life’s little pleasures. What’s better than being paid just for owning a slice of a company and sitting on one’s hands?
I think it’s when the amount of money I receive rises on an annual basis.
So, which UK-listed dividend shares have shown themselves to be more reliable than most?
No sure thing
Before revealing that, it’s worth being clear that no passive income stream is guaranteed. Dividends are often the first thing to be shelved or reduced when a company runs into trouble.
And I’ve never known a company not to run into trouble at some point in its existence.
Take oil giant Shell. Up until 2020, it had paid dividends to shareholders every year since the Second World War. Then the pandemic came along, the payout was cut and everyone was shocked.
As always, getting too comfy in the stock market is not recommended.
For this reason, I’ve relaxed my criteria slightly.
Instead of looking for perfection (which doesn’t exist), I’ve searched for stocks where dividends have been raised in most years.
This way, one or two companies experiencing a sticky patch will be held up by those that are trading just fine.
This is the central idea behind diversification and, in my opinion, it remains the best way of mitigating risk.
Dividend Aristocrats
Some UK stocks stand head and shoulders above the rest when it comes to raising their cash distributions.
FTSE 100 life-saving tech firm Halma is a great example. It’s grown its payouts by 5% or more for the last 44 years!
International distributor Bunzl is a long-term hiker too. Its hiking streak goes back decades, as does that of defence giant BAE Systems.
Spirits seller Diageo is yet another top-tier dividend star. FTSE 250 meat supplier Cranswick deserves a mention as well.
Predictably brilliant
Anyone spot anything interesting about the companies mentioned above?
For me, the fascinating thing is that they come from different parts of the market. Put another way, the similarity between dividend hikers is how dissimilar they are in terms of what they do!
However, there’s one thing that sticks out. These companies tend to sell products and services where demand is fairly constant.
Delivering cleaning and hygiene supplies sounds like the most boring business on the planet. But I’ve never heard of a hospital or care home saying they can do without.
Premium alcohol sales have wobbled during the cost-of-living crisis. But I don’t see evidence the world has turned teetotal.
Actual wars are mercifully irregular. But the threat of war is arguably constant.
Sleep easy
At this point, readers are probably expecting a warning that past performance is no guide to future returns. Consider that done.
But I don’t believe in ignoring the past completely. In the absence of a crystal ball, a solid track record is one of the few things I have for separating the market wheat from the chaff.
Knowing that there’s a decent chance that my stocks will continue making money while I sleep is good enough for me.
Consequently, I’d have no issue buying any of the stocks mentioned above today for a passive-income-focused portfolio.
And it just so happens that some are currently trading at a discount to their long-term average valuations!
The post More passive income every year? These have been the best stocks to buy appeared first on The Motley Fool UK.
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See the full investment case
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended BAE Systems, Bunzl Plc, Diageo Plc, and Halma 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.
