2 dividend stocks for the long haul

Looking for quality companies with strong fundamentals? Then check out these two dividend stocks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Dividend investing is a popular strategy to build long-term wealth, but it’s important to remember that yield is not the only factor to consider. There are many high-yielding stocks out there, but if you’re looking for reliable stocks for the long haul, it’s often best to look for quality companies with strong fundamentals and steadily growing dividends.

Dividend growth

Lloyd’s of London insurer Hiscox (LSE: HSX) is one such example. The Bermuda-incorporated insurer is set to lift its interim dividend by a penny per share to 9.5p, in a move which brings it closer to fulfilling management’s target dividend growth of 15% this year. This gives shares in Hiscox a prospective yield of 2.4% at the current share price.

The insurer said this morning that the net premiums earned during the six months to 30 June rose by 22% to £936.6m. This helped pre-tax profits, in constant currency terms, to climb 12% against the same period last year, to £133.5m.

When foreign exchange movements were taken into account, the figures looked a lot less cheerful as statutory pre-tax profits fell by more than half to £102.6m. However, it’s important to remember that currency volatility is only a short-term issue. Long-term fundamentals remain broadly intact, with the underlying combined ratio (a key measure of underwriting profitability), up by just 1.5 percentage points, to a still impressive 89.9%.

One of the key attractions of Hiscox is its growing retail business, which once again was its standout performer. The growth in retail continues to offset much of the weakness from its specialist London insurance business. Gross written premiums there declined 8% in the first half, compared to a 27% increase from the retail segment.

That’s because the pricing environment for larger premium, catastrophe-exposed lines remains tough as rating pressure continues amid excess underwriting capacity and historically low loss ratios. On the upside however, Hiscox had minimal exposure to some high-profile losses in the industry this year, including the Grenfell Tower fire and Cyclone Debbie, which hit Australia in March.

Demographic shift

Elsewhere, newly-listed Impact Healthcare REIT (LSE: IHR) could be a great pick for investors looking for long-term exposure to the property market. As an investor in residential care homes, this REIT looks set to benefit from two ongoing tailwinds, namely an ageing population and the chronic shortage of suitable properties for caring for the elderly.

The REIT’s property portfolio currently consists of 57 residential care homes, following the acquisition of the Seed Portfolio and Saffron Court in Leicester in May and June, respectively. And as is typical for the sector, Impact Healthcare benefits from long lease terms with upwards-only annual RPI-linked rent reviews. This enables the REIT to earn steadily-growing income and gives it significant protection against a potential downturn in the property market.

Looking ahead, the company sees a strong pipeline of attractive new potential investment opportunities, which includes further acquisitions and asset management opportunities. Subject to financing, it is set to move forward with plans to expand three of its existing homes to create 92 additional beds. With no debt in place at present, Impact Healthcare surely has plenty of potential for growth.

Shares in the REIT currently trade at a 5% premium to its net asset value, with a prospective dividend yield of 5.8% this year.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

2 of the best stocks to buy now with £500

I think that Berkshire Hathaway and Activision Blizzard are two of the best shares to buy today. I think they…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

I bought 10 cheap shares. Here’s what happened next

After recent price falls, we bought 10 cheap shares for extra passive income in future. This mini-portfolio offers a tasty…

Read more »

Close up view of Electric Car charging and field background
Investing Articles

Is now a good time to buy Chinese EV stocks as economic growth slows?

Chinese EV stocks tend to trade at a considerable discount to their US counterparts. And that's one reason I like…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

I’d happily start investing in today’s stock market – here’s why

The stock market has been moving up even as the economy has been looking shakier. Would our writer start investing…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Up 22% in a month! This FTSE 100 takeover target could rise further

A takeover bid for an FTSE 100 firm is big news. Here's what I'm doing about RS Group shares after…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Income shares could help me turn £300 into £500. Here’s how

Our writer believes investing in the right income shares over the long term could be lucrative. Here is his approach.

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

I bought these FTSE 250 shares for fat dividends!

These two FTSE 250 shares have gained in value since I bought them recently. But I still see these stocks…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

Should I buy this REIT to add to the others that pay me juicy dividends?

Jabran Khan looks closer at this real estate investment trust (REIT) and decides if he would add the shares to…

Read more »