Why I’m investing in these dividend shares to target long-term riches

Andrew Woods takes a closer look at two dividend shares and explains how they may be able to provide him with income.

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I’ve long searched for stocks from which I can derive an income. In most cases, I opt to invest in top dividend shares from across the indexes. I’ve recently found two well-established firms with attractive dividends, so let’s take a closer look.

A rising silver price

The first company to which my attention is drawn is Fresnillo (LSE:FRES). For 2021, the business – a FTSE 100 silver and gold miner – paid a dividend of $0.34 per share. At current levels, this equates to a yield of around 3.34%.

The shares are up over 16% in the last three months. At the time of writing, they’re trading at 769p.

Much of this positive price action has to do with the underlying price of silver. This has increased around 5.6% in the last three months. 

What this essentially means is that the value of Fresnillo’s product is climbing. This is good news for the company.

For the six months to 30 June, however, profits fell by 54.3%. While this may seem disappointing, it’s worth noting that much of this was down to lower productivity and a weak silver price.

The threat of further pandemic-related worker absences, though, is still something I’m aware of.

Despite this, the firm has just completed the electrification of its Juanicipio mine. This development should lead to higher productivity rates in the coming months.

Safe and secure?

The second firm I’m looking at for dividend purposes is BAE Systems (LSE:BA.). In 2021, the defence company paid a dividend of 25.1p per share. This is equivalent to a yield of 2.97%. 

The company is in the latter stages of securing a deal with the UK government to build five new warships. These would be used for surveillance in the North Sea. 

Previously, it won a similar contract to construct three ships, which was worth an estimated £3.7bn. This new deal, if completed, could be very good news for the firm.

The investment business Deutsche Bank also recently raised its price target for BAE Systems from 860p to 970p. It cited an improved cash flow outlook for this change.

The firm does face the threat posed by inflation, however, and is also working to mitigate the rising prices of raw materials, like steel.

Despite this, it’s embarking on a £1.5bn share buyback scheme. This is another way I could derive income from this investment and signals a healthy company.

Additionally, it stated that underlying operating profits climbed by 8.2% for the six months to 30 June.

Overall, both of these businesses are attractive prospects for potentially deriving an income. While they face challenges, like production issues and inflation, I think they could perform well over the long term. To that end, I’ll add them both to my portfolio soon.

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 recommended Fresnillo. 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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