Dividend stocks form the core of my portfolio. They provide me with passive income and require minimal effort on my part. But picking the right stocks can be the tricky bit.
With inflation tipped to rise above 13% this year by the Bank of England, and 18% by some other analysts, I want to make sure that my money is working as hard as possible.
As interest rates rise, I can earn more money now than I used to by leaving it in a savings account. But savings rates are still pretty meagre and often require me to lock my money away for years.
That’s why I’m buying these two dividend stocks.
Legal & General
Legal & General (LSE:LGEN) is a fairly steady stock. The British multinational financial services and asset management company has proved less volatile than many other FTSE 100 peers this year. It’s down just 0.8% over 12 months and 0.6% over six months.
2021 was a good year for the firm. Following a huge 39% increase in annual pre-tax profits, the firm raised its dividend in April. Pre-tax profits came in at £2.49bn, while profit after tax soared 28% to £2.05bn.
The dividend yield for this blue-chip stock now sits at 7.15%. That’s way above the index average. Analysts at Bank of America Securities recently reiterated their “buy” recommendation for the firm and highlighted the group’s record Solvency II ratio, telling clients that “even a severe credit cycle (if one arose) should not threaten its share count or dividend.”
While a recession is rarely good for any business, and the forecast recession certainly won’t be positive for Legal & General, it operates in a fairly steady area of the market. Demand for pensions, insurance services and wealth management aren’t going to disappear overnight.
Hargreaves Lansdown
Hargreaves Lansdown (LSE:HL) shares are down 40% over the past 12 months. So I’d be forgiven for assuming that something must be wrong with this stock.
But that’s not the case. The stocks and funds supermarket had an excellent pandemic as people were locked away in their homes and turned to investing. However, in 2022, and rather unsurprisingly, the firm hasn’t been able to sustain the rate of growth it experienced during the pandemic.
Despite this, the firm is still growing. It recorded £5.5bn of net new business, alongside a 92,000 increase in active clients and revenue of £583m during H1. All this at a time when other financial services firms are seeing net outflows.
For me, Hargreaves stands to benefit as more and more people take control over their own investments. It’s the best platform in my opinion and it’s already the market leader. Yes, other cheaper platforms might steal some market share, but I still see huge growth potential here.
Despite being one of the index’s most promising growth stocks, the firm is currently offering an attractive 4.5% dividend yield.
