The beginning of each month provides me with cash, some of which I try to use to invest in the stock market. Given the chatter last week about the potential for faster interest rate cuts here in the UK, I’m keen to try and make my money work harder via purchasing some dividend shares. With £300, here are a couple I’m trying to decide between.
An alternative banking choice
The first stock I’m thinking about is Paragon Banking Group (LSE:PAG). The bank’s an alternative to the major FTSE 100 household names, although this isn’t a small firm by any means. The company’s in the FTSE 250 and has a current market-cap of £1.57bn.
Over the past year, the stock’s risen by 63% yet the dividend yield‘s still above average at 5.15%. The latest results for fiscal H1 2024 showed a jump in profit, with factors including “good loan growth, improved margins and tight cost control”. This allowed it to increase the dividend per share payment by 20% versus the same period last year.
As the business is growing, it’s diversifying risk across different divisions. For example, it’s making a push towards commercial lending, with this making up 48% of total lending for H1 2024. I think this is a smart move, as being too exposed to retail customers can be a risk.
One concern is the fact that cuts to the base interest rate will reduce the profit margin it makes on loans and deposits. However, this is a factor that all those in the banking industry will have to deal with going forward.
Getting real with real estate
Another idea is Sirius Real Estate (LSE:SRE). Also in the FTSE 250, the real-estate investment trust (REIT) owns a portfolio of business parks, offices and mixed-use workspaces in the UK and Europe. The stock’s jumped by 11% over the past year.
Due to its REIT status, the Sirius management team has to pay out a certain amount of profits as a dividend to shareholders. For the past few years, it’s paid out two dividends a year, equating to a current dividend yield of 5.38%.
The latest business update showed a 86.2% occupancy rate in the UK, spread across 3,739 tenants. These range from blue-chip companies to SME’s. I like the fact that it has a broad range of clients. It means even if it loses a couple, or if one particular industry suffers, it shouldn’t have a materially negative impact.
Looking forward, I’m optimistic about commercial property coming back into vogue. I’m hearing about more and more firms looking to enforce a stricter office working policy and moving to a more hybrid work from home stance. This should keep tenant demand high for Sirius.
The net debt-to-EBIDTA level is 5.6 times. This is high, in my view, and could be seen as a risk. The management team needs to keep a close eye on this.
I like both ideas, but think Paragon just edges it for me. I’m seriously thinking about investing the £300 for October in that one.
The post With a spare £300, here are 2 top dividend shares I’m thinking of buying now appeared first on The Motley Fool UK.
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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
