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Working towards passive income in the stock market takes time, and I don’t think anyone should start by chasing the highest yield. For me, the better thing to focus on is whether a company can keep paying and growing dividends for decades.
That’s why I like businesses that have been rewarding shareholders since my father was young, not just stocks that look tempting today. If I’m thinking 20-30 years ahead, I want durability, not drama.
So which UK dividend stocks look strongest as we move into the second half of 2026?
10 income stocks that complement
For me, the best dividend stocks have three things in common: they throw off enough cash to cover payouts, they have long records of paying shareholders, and they carry debt levels that don’t threaten the dividend.
I also like businesses with pricing power, because that helps them protect margins when inflation or weak demand hits. That’s why I’d rather own a steady 4%-yielder like Diageo (LSE: DGE) with a strong record, than chase an 8% yield that could disappear next year.
| Stock | Why it stands out | Income profile |
|---|---|---|
| Diageo | Global brands and a 42-year dividend record | 4% yield, recovery dependent |
| Unilever | Defensive consumer staples with long-running payouts | Moderate yield, steady |
| RELX | Recurring revenue from information services | Lower yield, very dependable |
| Halma | 45 consecutive years of dividend growth | Lower yield, strong growth |
| Bunzl | Defensive distributor with long dividend discipline | Moderate yield, resilient |
| National Grid | Regulated cash flows support income visibility | Higher yield, slower growth |
| UnitedUtilities | Regulated water business and predictable earnings | Higher yield, defensive |
| Severn Trent | Similar regulated model and long-term income appeal | Higher yield, defensive |
| Shell | Huge cash generation, but commodity risk is real | Higher yield, cyclical |
| HSBC | Large payout potential, though earnings are cyclical | Higher yield, more volatile |
My top pick today
Diageo looks especially interesting for both income and value investors this year. The alcoholic beverages producer owns and markets several ‘billion-dollar’ globally recognised brands worldwide.
In recent results, management said the group’s “broad portfolio of iconic brands” with sales in “nearly 180 countries”. That gives it the scale and reach many income investors want. Despite a 50% price decline in the past five years, profitability remains solid, with a return on equity (ROE) of 21.39%.
It has a moderate 4.09% dividend yield with a high payout ratio around 80%, but the key attraction is its 47-year payment track record. That shows strong dedication to rewarding shareholders.
Still, it’s faced notable challenges lately and its price fall has reflected them. The latest results showed pressure on sales in North America and China, and it may have to reduce dividends to strengthen the balance sheet (net debt is $21.7bn).
So it may not be a perfect income stock, but if the price recovers, total returns from both dividends and capital gains could be significant.
The bottom line
Diversification goes beyond just including stocks from different sectors. Even within a pure income portfolio, it’s important to include a variety of dividend stocks with complementary characteristics.
Each of the dividend stocks I covered here could all add value to an income portfolio in various ways. A portfolio filled only with high yielders can look attractive until one or two companies cut payouts, so it often makes sense to consider including stronger, more established businesses like Diageo.
That kind of balance is usually what helps income remain steady through rough market cycles.
Should you invest £5,000 in Diageo Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Diageo Plc made the list?
Mark Hartley owns shares in Diageo, Unilever, RELX, National Grid and HSBC.
