Investing in dividend stocks is a tried-and-tested method for generating a second income. Here are three income shares that look set to up their payouts for many years to come.
Raw materials
Transitioning to a green economy is going to take decades. And as the world gears up for net zero, global demand for raw materials is set to soar. That’s why I’d buy BlackRock World Mining Trust (LSE: BRWM) to gain exposure to this commodities super-cycle.
The trust invests in many of the miners that are extracting the metals and minerals — copper, nickel, iron ore, lithium, etc — that the modern world needs to function. Top holdings include BHP Group, Glencore and Rio Tinto. But there are also rare earth miners in the portfolio, too.
The dividend yield is around 4.4% today. And despite the volatility that comes with mining stocks, I think the trust offers fantastic long-term second income potential.
Energy transmission
National Grid (LSE: NG) owns and operates electricity and gas transmission networks across the UK and the US. This may sound boring, but it has a near-monopoly in its industry. And its reliability and steadiness make it a perfect stock for me to consider for a second income.
National Grid has recently been repositioning its portfolio of assets. In 2021, it acquired Western Power Distribution, the UK’s largest electricity distribution network operator, for £7.8bn. It also disposed of certain gas transmission operations.
These deals mean that nearly 70% of the firm’s assets are now focused on electricity. This is a logical move considering how much electricity demand is set to soar during the green transition. But it’s left a lot of debt on the balance sheet. Indeed, net debt now stands at around £42bn, the repayment of which might threaten dividend growth.
Nevertheless, as things stand, National Grid is still generating a boatload of cash. The dividend yield stands at 5% today.
Green energy
The final stock I like for a second income is The Renewables Infrastructure Group (LSE: TRIG). This is a £3.3bn renewable energy investment company that invests in assets that generate electricity from renewable sources.
TRIG owns a broad portfolio of wind and solar farms across the UK and other countries in Europe. The company estimates 1.1m properties (and growing) are powered from its portfolio today.
It makes money by selling the electricity these assets generate, before distributing generous proportions of that money to shareholders as income. At 130p per share today, the dividend yield stands at a very attractive 5.2%.
The growth of renewables will almost certainly accelerate over the coming decades. I think that gives TRIG a firm foundation from which to pay me a reliable second income.
Of course, it’s always possible that dividends are cut. That can often happen with little or no notice. More specifically, TRIG could have to pay further windfall taxes like the one announced on electricity generators by the UK government last year. This tax will hit profits for the next couple of years, which creates a degree of uncertainty.
Having said that, I think the long-term future looks bright for TRIG. That’s why I recently bought the stock myself.
