HSBC, Aviva and Sainsbury’s are all income “stars” investors should keep tabs on, according to Chris Beauchamp, chief market analyst at IG, as dividends from UK companies more broadly continue to underwhelm.
Earlier this morning, the Computershare Dividend Monitor revealed UK companies paid out £24.6bn to shareholders in the third quarter of 2025, down 1.4% on the same period last year. Analysts at the firm now expect dividends to fall to £87.2bn in 2025, a 2.3% drop from 2024 figures.
Beauchamp said UK investors have “got used to payouts helping to prop up the somewhat modest annual returns of the UK market in recent years” and noted that, while the overall dividend landscape “is holding up well”, payouts in the fourth quarter are “a little less promising” and there is “some weakness in the bigger names”.
Additionally, any hopes that earnings growth will propel the index higher next year are “called into question” by the mixed macroeconomic outlook.
With this backdrop, he highlighted three companies paying strong dividends that could be worth looking at for those with income requirements.
The first is banking titan HSBC, which was noted in the Dividend Monitor as one of the companies with a huge share buyback programme. Companies can choose to spend their excess cash on buying their shares and inflating the price, or distribute cash to shareholders through dividends.
HSBC is doing both, which means its dividends are lower than they potentially could be, but Beauchamp said it is a “dependable income stock”, having steadily lifted its dividends over the past five years.
The bank has had to rebuild its reputation, he noted, as it has previously come under fire for anti-money laundering violations.
However, “strong profits and capital discipline mean payouts are well-covered, supported by stable earnings from Asia and the UK,” he said, adding that “investors get a solid and sustainable income stream without excessive risk”.
Shares in HSBC currently sit on a price-to-earnings (P/E) ratio of 10.6x and yield 5.09%.
Staying in the financials sphere, his second selection is insurance and asset management firm Aviva. The stock is more expensive, sitting on a 28.2x (P/E) ratio, but offers a higher yield of 5.37%.
Beauchamp said it is a “streamlined business” that produces strong cash generation that has “powered consistent dividend growth”.
“The insurer’s payouts are well-covered and backed by healthy capital reserves, offering a dependable and sustainable source of income among FTSE 350 peers,” he said.
Lastly, he pointed to supermarket chain Sainsbury’s, which has the lowest starting yield of the three (2.85%) but is more reasonably valued than Aviva, with shares sitting on a P/E of 14.8x.
“Sainsbury’s has delivered steady dividend growth, supported by resilient trading and strong cashflow. Its payout is well-covered and underpinned by efficiency gains and solid grocery demand, providing reliable income with scope for further growth,” said Beauchamp.