3 UK Stocks Poised to Sustain Dividend Growth

Investors typically appreciate the prospect of earning dividends, especially those that show potential for growth over time. In the UK, certain stocks have established a reputation for consistent dividend increases. Here are three UK stocks that stand out for their ability to sustain dividend growth.

Phoenix Group

Phoenix Group (LSE: PHNX) operates in the financial services sector, mainly focusing on savings and retirement solutions. It boasts an impressive dividend yield of 7.6%, making it one of the highest among FTSE 100 companies, second only to Legal & General.

With approximately 12 million customers, Phoenix generates robust cash flow that supports its dividend strategy. The company aims to grow its dividend per share annually and has a solid history of doing so. Strengths include economies of scale and a solid investment approach. However, investors should consider risks such as the potential impact of a property market downturn.

Cranswick

Cranswick (LSE: CWK) is a lesser-known name in the FTSE 250, primarily known for its food production. The company supplies numerous retailers, offering products sold under various brand names. Given that food consumption is a constant necessity, demand for Cranswick’s offerings remains robust.

The company has effectively grown its dividend per share for 35 consecutive years, ensuring that dividends are well covered by diluted earnings. Nevertheless, Cranswick faced reputational challenges due to previous allegations concerning animal welfare at its farms. The company has since responded by initiating an independent review. With a current yield of 2% and a share price trading at 18 times earnings, some investors might find the potential for growth appealing, though timing is key.

Dunelm

Dunelm (LSE: DNLM) is a prominent player in the homewares market, but it has encountered challenges recently. The company’s share price has decreased by 15% since the start of the year, leaving it 19% lower than five years ago. Despite these setbacks, current prices might present a buying opportunity.

Dunelm issued a profit warning, heightening concerns about consumer spending affecting its sales. However, it has demonstrated market resilience through various economic cycles. The company continues to produce significant cash flows, and although its special dividend has fluctuated, the regular dividend has shown steady growth, currently offering a 4.7% yield.

Summary

• Phoenix Group: 7.6% dividend yield; 12 million customers; strong cash flow.
• Cranswick: 35 years of dividend growth; 2% yield; issues related to animal welfare resolved.
• Dunelm: Currently down 15%; 4.7% yield; proven market resilience.

Each of these stocks presents unique advantages and risks, making them intriguing options for investors seeking to benefit from dividend growth in the UK market.