Two dividend stocks I really like the look of are IG Group (LSE: IGG) and Unilever (LSE: ULVR).
Here’s why I’d love to buy some shares when I next can to help me achieve my goal of building a second income.
IG Group
The fintech firm, best known for trading platforms as well as education-related resources, looks like a good pick to me.
IG Group shares have been on a good run in the past 12 months, in my view. They’re up 12% during this period from 697p at this time last year, to current levels of 787p.
Diving into some fundamentals, a forward dividend yield of close to 6% is enticing. However, it’s worth noting that dividends are never guaranteed.
Furthermore, IG has been buying back its own shares, which is usually a sign of a business in good shape to me. A healthy balance sheet indicates that returns, as well as growth plans, could continue, which is pleasing to see.
Next, the shares look good value for money as they currently trade on a price-to-earnings ratio of 10. They may not remain at such an attractive level if the share price ascent continues.
I’ve noticed that IG is working hard on expanding its footprint and product range. However, from a bearish view, there are a couple of issues that worry me. Firstly, the sector as a whole is very competitive. Losing market share to a competitor could dent earnings and returns.
The other risk for me is the firm’s fortunes being linked to volatility. When there’s heightened volatility, consumers tend to trade more and earnings are better. Conversely, a lack of volatility could hinder performance and potentially returns. This cyclical nature isn’t ideal.
Overall the potential rewards outweigh the risks for me, hence my bullish stance on the stock.
Unilever
Consumer goods king Unilever is a no-brainer buy in my eyes.
The shares have been held back by volatility in the past year or so, in my view. However, in recent months, they have been showing signs of life and edging upwards. Over a 12-month period they’re up 9% from 3,996p at this time last year, to current levels of 4,384p.
Unilever’s dividend yield currently stands at 3.4%. For me, this isn’t the highest, but that doesn’t faze me. A high yield isn’t the be all and end all. Consistency of payouts and future prospects mean more to me, and Unilever ticks that box.
Personally, I believe Unilever has an element of defensive ability. Many of its products are essentials, such as hygiene and personal care products. Couple that with proprietary formulas, strong brand power, and a vast reach, and the business has a winning formula.
From a bearish view, the recent economic struggles have led to a rise in popularity of non-branded alternatives consumers can pick up for a fraction of the price. With such products available more than ever, changing shopping habits could impact Unilever’s earnings and investor returns.
I would happily buy and hold Unilever shares for years and bag dividends to build a pot of money.
