2023 is expected to be a difficult year for the UK as it goes through a difficult stagflation period. A combination of high inflation, slow growth and high-interest rates could lead to underperformance of the FTSE 100 and FTSE 250 indices.
Therefore, quality companies with stable dividends could provide investors with some cushion. Here are some of the best FTSE 100 dividend aristocrats to buy in 2023.
What are FTSE 100 dividend aristocrats?
A dividend aristocrat is defined as a company that has consistently paid and increased its dividend for at least 25 years. In the UK, however, an aristocrat is a company that has paid and increased its payout in the past 10 years.
British American Tobacco
British American Tobacco (LON: BATS) is a leading tobacco company that operates around the world. The company’s brands include Dunhill, Lucky Strike, and Rothmans. The firm sells its products around the world.
BAT, like other sin stocks, has an extremely high dividend yield of 8,42%, which is higher than those of most companies. It has over 25 billion in revenue and billions in profits. The company is also actively buying back its stock, which will boost its earnings per share.
In 2022, the BAT share price soared by more than 26% despite its exit from Russia. I suspect that its stellar performance will continue in 2023 as global travel reopens fully.
Diageo (LON: DGE) is another top FTSE 100 dividend aristocrat to buy in 2023. Like BAT, it is a sin stock that has a dividend yield of 2%. While the yield is a bit small, the company has compensated it with a significant share repurchase program.
Diageo, owner of brands like Smirnoff and Guinness, has had a slower recovery compared to peer companies like Molson Coors. This slower growth is mostly because of its Russian exit.
The firm is also spending aggressively to grow its market share. Its marketing budget has grown to its highest level in years. Diageo is a good dividend aristocrat because of its strong brand positioning, the potential for growth, and its diversified brand positioning.
GSK (LON: GSK) is one of the biggest pharmaceutical companies in the world. It has a market cap of over $72 billion, making it the tenth-biggest company in the UK. The firm went through a major transition in 2022 as it completed its demerger with Haleon, as we wrote here.
GSK share price has lagged following the demerger. It has slipped by more than 25% from its highest level during the year.
Still, the company is a good investment for 2022 as it continues with its transition. The firm has a stable business and a high dividend yield of 4.5%. It could rebound in 2023 because of its strong pipeline and its strong presence in key industries like cancer treatment and a major presence in vaccines.
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