I’m investing £200 a month into these 2 top dividend shares

Andrew Woods explains why he’s decided to start a monthly investment in these two dividend shares to potentially derive a solid income stream.

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While investing for growth can have its benefits, finding high-quality dividend shares can also be exciting. Deriving an income merely from holding stock may help me towards greater financial stability. I’ve found two interesting companies that I’m starting monthly investments in, so let’s take a closer look.

19.3% yield!

First, Base Resources (LSE:BSE) paid a total dividend of $0.04 for the year ended June 2022. At current levels, this equates to a dividend yield of 19.3%. From my research within the stock market, this is one of the highest yields that I’ve come across.

It’s important to note, however, that dividend policies may be subject to change in the future.

For the year ended June, the Africa-based mineral sands mining firm posted revenue of $279.1m. In addition, the average unit sales price climbed 33%.

The business has strong free cash flow of $59.4m and a cash balance of $55.4m. This suggests that the company is in good shape to face any challenges ahead, or to expand.

It’s worth noting, however, that any exploration operation carries the risk of yielding lower volumes than initial estimates.

In the past year, though, Base Resources stated that its production had improved markedly. Volumes of rutile, ilmenite, and zircon increased by 26%, 42%, and 57% respectively. As a potential shareholder, it’s promising to see consistent growth within the mining operations.

Steely dividends

Second, Severfield (LSE:SFR) paid a total dividend of 3.1p for the year ended March 2022. At the moment, that equates to a dividend yield of 5.46%. Although this isn’t as high as the Base Resources yield, it’s still competitive.

For the 12 months to 26 March, the structural steel firm reported that revenue increased by 11.09% to £403.6m. In addition, underlying operating profit came in at £26.9m from £25.5m the previous year.

Despite this, operating margins narrowed to 5.7%. This reflects the difficult operating environment at the current time, with wage and cost inflation running rampant.  

On the flip side, earnings per share (EPS) grew from 6.4p to 7.2p, highlighting the fact that Severfield has been delivering for its shareholders year in, year out. 

Additionally, the company’s total dividend payment of 3.1p represented a 7% increase compared to the previous year.

Going forward, I’m confident as a potential investor that the business will likely continue to perform to a high standard. It has a forward order book of £486m, which includes future work on the new Everton Football Club stadium. 

Overall, both of these companies appear to command strong positions and improving results. There are, of course, challenges. However, I’m think that the businesses can overcome these over the long term. To that end, I’ll invest £200 per month in these firms in order to derive income.

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 assessed. Consider taking independent financial advice.

Andrew Woods has no position in any of the 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.

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