The dividend stocks I’ve been buying for income

Here are some of the dividend stocks I’ve been buying recently to increase the level of discretionary income generated by my portfolio.

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.

I’ve been buying dividend stocks to boost my disposable income over the past year. After the Bank of England slashed interest rates to the lowest level on record last year, I started considering boosting my holdings of income stocks to increase the yield on my savings. 

This isn’t something that’s going to be suitable for every investor. Buying stocks and shares comes with significant risks. For example, the value of investments can go up as well as down, and dividend payments are never guaranteed.

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However, I’m comfortable with this level of risk, and I’m not planning to invest all of my savings in equities. After all, one should never invest more than one can afford to lose in the stock market. 

Dividend stocks for income

As dividend income is never guaranteed, I’ve focused my efforts on buying what I’d call high-quality dividend stocks. Specifically, these tend to be well-known businesses with high profit margins compared to the rest of the market. They also have track records of increasing their distributions to investors. I think these companies have a higher chance of sustaining dividends to investors. 

An example is GlaxoSmithKline. This one of the world’s largest pharmaceutical businesses. Last year, it reported an operating profit margin of 24% compared to the market median of 4.1%. It has also held its dividend steady at 80p per share for the past five years.

The stock currently supports a dividend yield of 5.7%. In the past, Glaxo’s dividend has come under threat due to falling sales, which could happen again. So, this is by no means a guaranteed income investment. Nevertheless, I think the company has strong income credentials.

Insurance 

A company I’ve been buying for my personal portfolio of dividend stocks is the insurance group Admiral. Insurance can be a challenging business, but Admiral has managed to crack the code. Last year, its reported an operating profit margin of 42% compared to the insurance industry median of 9%. It’s increased its dividend every year since 2014 and currently offers a dividend yield of 5%.

The organisation has been lucky in the past because its level of claims or insurance payouts has been relatively low, but that could change at any point. If it does, the business may be on the hook for substantial losses. I think its dividend would be the first thing to go in this scenario. 

Property yield

Another company on my list of dividend stocks is real estate investment trust Regional REIT. This group focuses on buying commercial property outside of the M25. Commercial property is one of the sectors that’s been hit hardest by the pandemic. 

At this stage, it’s unclear if the industry will ever return to its former glory. Working from home has become mainstream, and that suggests demand for office space is likely to be lower going forward.

Still, Regional seems to be coping well. The company reported that 95.5% of rent due for 2020 had been collected in its latest trading update, only slightly below the figure of 96.9% collected for 2019. These numbers suggest the business is outperforming the rest of its industry, although that could change as the crisis drags on. The REIT’s dividend currently stands at 8.2%.

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