The goal of many — particularly income investors — is to create a second source of earnings via dividends ahead of their later years.
Without further ado, here are five stocks that contributors to TMF UK’s free-to-read articles own for this very purpose!
BlackRock World Mining Trust
What it does: BlackRock World Mining Trust manages a diversified portfolio of global mining and metal assets.
First and foremost, it exposes my portfolio to a range of compelling long-term themes such as decarbonisation and the development of renewable energy sources. So that’s all the usual metals like copper, iron ore, and nickel. But there’s also a 16% weighting in gold.
Second, the income stream is diversified as the trust also makes use of fixed income and unquoted instruments. Plus, the majority of its holdings generate earnings from around the world.
This has supported a five-year annualised growth rate of 20.7% in the dividend per share. The yield currently stands at 6.5%.
The main risk with mining stocks is that they are cyclical. So the dividend could be cut due to the Chinese economy slowing. But I like that the two fund managers have decades of experience between them and are versed in commodity price cycles. I own shares for the long term.
There is an ongoing charge of 0.95%.
Ben McPoland owns shares in BlackRock World Mining Trust.
Coca-Cola Hellenic Bottling Company
What it does: Coca-Cola Hellenic Bottling Company bottles popular drinks including Coca-Cola, Sprite and Monster Energy.
By Royston Wild. Soft drinks business Coca-Cola Hellenic Bottling Company (LSE:CCH) has never been one of the FTSE 100’s biggest dividend payers. For the current financial year its dividend yield sits at 2.9%.
However, the company’s exceptional track record of growing dividends is what attracted me to buy it for my own portfolio. Annual payouts have risen 129% over the past decade. It has also doled out special dividends during this time.
Brilliant cash generation and earnings delivery makes Coca-Cola HBC a true Dividend Aristocrat. Spectacular brand power means demand for its drinks remains high at all points of the economic cycle. Their desirability also allows the firm to effectively raise prices to give profits an extra boost.
The FTSE firm’s wide geographic footprint also gives strength to its progressive dividend strategy. It reduces risk to the group’s bottom line from trading trouble in certain regions. This quality also gives the firm exposure to fast-growing emerging markets where beverage demand is booming.
Despite competitive pressures, this is a rock-solid UK share I plan to hold for second income over the long haul.
Royston Wild owns shares in Coca-Cola Hellenic Bottling Company.
What it does: DCC is a conglomerate with a large energy distribution business as well as healthcare and technology divisions.
That is a lucrative business. Customers have an ongoing need for energy and DCC has a leading role in many markets. It is the number one LPG supplier in markets as diverse as Sweden and Hong Kong.
Energy is the key plank of DCC’s strategy, but I think the healthcare business has long-term promise too.
Last year, the company’s free cash flow slipped — but still came in at over £1m per day. The annual dividend grew for the 28th year in a row, by 10%.
Falling energy prices are a risk to profits. So are moves away from gas use in some markets. Still, the FTSE 100 firm’s price-to-earnings ratio of 13 looks cheap to me. The current dividend yield is 4.3%. I am hopeful of continued dividend growth in future.
Christopher Ruane owned shares in DCC at the time of writing, though has since exited his position.
What it does: FTSE 250-listed Moneysupermarket.com operates one of the UK’s most popular price comparison sites.
By Paul Summers: As much as I look forward to making a nice paper profit from the shares if/when competition in the energy market returns, I’ve been enjoying the dividends I’ve received from Moneysupermarket.com (LSE: MONY) to date.
This is not to say that it’s been all plain sailing. The annual payout didn’t budge during the ‘pandemic years’ with doubts that profits would be enough to cover the planned cash return to investors.
Fortunately, trading has now improved, helped by a recovery in demand for travel insurance.
While it may still take a while for the business to be firing on all cylinders, the cost-of-living crisis and greater demand for price comparison services suggest to me that this income stream is no longer in immediate danger.
Importantly, the forecast 4.3% yield for FY23 is also more than I’d get from a FTSE 250 index tracker, helping to justify the additional risk.
Paul Summers owns shares in Moneysupermarket.com.
What it does: Taylor Wimpey is one of Britain’s largest housebuilders and is known to be one of the big five developers in the country by number of houses built per year.
By John Choong: The Taylor Wimpey (LSE:TW) share price has fallen sharply recently due to rising interest rates, thereby hurting housing affordability. Nonetheless, long-term investors should still be able to find plenty of value in the stock.
The company has a strong track record of dividend growth and it doesn’t look to fade any time soon. This is down to the firm’s assuring dividend policy, which aims to repay shareholders at least 7.5% of its assets every year. And despite the tough housing market, the unequivocal demand for housing will mean that Taylor Wimpey should be able to generate high returns over the long term and significant cash flow to support future dividend increases.
With the shares trading at just 6 times earnings with a 9% dividend yield, the stock looks very attractive. This is why I own Taylor Wimpey shares — for the reliable and growing dividend income stream. The current high yield provides an opportunity to lock in an inflation-beating income stream over the long run.
|Metrics||Taylor Wimpey||Industry Average|
John Choong has positions in Taylor Wimpey.