When it comes to buying dividend stocks, I only invest in shares I’d feel comfortable enough to own for at least a decade.
Billionaire investor Warren Buffett’s advice to “only buy something that you’d be perfectly happy to hold if the markets shut down for 10 years” is one of my core investing values. It’s a strategy that, over the long term, allows any adverse market volatility to balance out, reducing the impact of any such choppiness on eventual returns.
It also discourages investors from making knee-jerk decisions that can impact their wealth. This can be especially important when it comes to dividend investing, where the pull of huge near-term yields can be too much for individuals to resist.
With this in mind, here are two top income shares I’ve bought to hold until at least the early 2030s.
Rio Tinto
Mining giant Rio Tinto (LSE:RIO) is a share whose profits (and, by extension, dividends) are in danger as the global economy cools.
This year’s predicted dividend yields an impressive 6.8%. However, it is covered just 1.7 times over by expected earnings. Any reading below 2 times provides scope for disappointment, according to investing theory.
But I still expect dividends from the metals titan to surpass those of most other FTSE 100 shares. After all, the forward index for the UK’s leading share index sits way back at 3.8%.
Besides, over the next decade, I expect payouts to rise strongly as demand for its raw materials soars. And as a long-term investor, thinking over this sort of timescale is my priority.
The company’s broad product suite includes iron ore, aluminium, copper and lithium. This gives it an opportunity to capitalise on many hot growth trends. These include emerging market urbanisation and rising renewable energy consumption. This diverse portfolio also helps to reduce investor risk.
The Renewables Infrastructure Group
Like Rio Tinto, The Renewables Infrastructure Group (LSE:TRIG) is a share I think could deliver titanic shareholder returns as the green economy takes off.
It owns a string of onshore and offshore wind farms across the UK and Mainland Europe, along with solar farms and battery storage assets. It has a wide geographic footprint I hope would reduce the risk that adverse weather conditions pose to energy production at group level.
Demand for low-carbon energy is soaring as concerns over the climate emergency rise. For the first time ever, wind and solar energy accounted for 30% of all EU electricity production during May and July, according to industry body Ember. Cleaner sources will be required in increasingly-high quantities too as Europe weans itself off of coal, oil and gas.
I think recent share price weakness makes The Renewables Infrastructure Group a steal. Not only does it carry a gigantic 7.2% dividend yield today, it trades at a huge 24% discount to its net asset value (NAV) of 132.2p per share (as calculated in June).
