I’m searching for top dividend stocks to buy in May to boost my passive income. And the following FTSE 100 shares have caught my eye.
Each carries a forward dividend yield comfortably north of the FTSE index’s 3.5% forward average. Here’s why I might buy them in May.
Barratt Developments
The outlook for Britain’s housebuilders still remains uncertain in the near term. The persistence of double-digit inflation means the Bank of England may have to keep raising interest rates for longer, pushing mortgage rates still higher.
Yet the resilience of the homes market despite such pressures is encouraging me to increase my exposure. Barratt Developments (LSE:BDEV) is one FTSE 100 housebuilder I might raise my stake in next month.
The dividend yield here sits at a fat 7% for this financial year (to June). And I think profits and dividend estimates could be upgraded here as the year progresses, and potentially as soon as next month. First-quarter trading numbers due on 3 May could come in strongly.
Housing activity fell sharply following last autumn’s disastrous mini budget. But the homes market has picked up from that trough, with key reports from the likes of Halifax and Rightmove this month showing property prices trekking higher once more.
Home sales are being supported by intense competition in the mortgage market. And, encouragingly, the fight among lenders is picking up, giving borrowers even more of a helping hand. Latest data from Moneyfacts shows the rate of two-year and five-year mortgage deals continues to fall.
I’m confident that Barratt’s profits will rise strongly over the long term. The pace of home supply has long failed to keep up with demand growth, resulting in explosive price growth. And this imbalance looks set to worsen as strict planning rules stymie new construction.
Taylor Wimpey chief executive Jennie Daly has described the planning system as “the worst I can remember in my 30 years of experience” in comments to The Times. I plan to hold my Barratt shares for the next decade, perhaps longer.
Vodafone Group
Telecoms giant Vodafone Group (LSE:VOD) is another UK share I’m looking at for passive income. For the current financial year to March 2024 it carries a mighty 8.5% dividend yield.
The FTSE 100 business is a major player in European and African markets. And it’s looking to boost its position in key growth areas such as 5G and ultra-fast broadband through heavy investment in infrastructure. As the world becomes increasingly digitalised, such measures could deliver exceptional long-term returns.
I think Vodafone is a top stock for these uncertain times too. Citizens and businesses alike need to stay connected at all points of the economic cycle. Thus the business has the power keep raising prices to keep growing profits. Indeed, the firm imposed tariff hikes of up to 14.4% on mobile and broadband customers earlier this month.
Expanding its infrastructure and maintaining it is an expensive business. And this can have a big impact on earnings and dividends. Yet, on balance, I believe Vodafone is a great way to generate a second income.
