I always favour companies that pay out relatively small but rising amounts of passive income every year compared to those offering gigantic but stagnant dividends.
My reasoning’s pretty simple. Consistently rising cash returns tend to be indicative of a business in rude health. Those in the latter camp tend to be treading water.
Britvic
FTSE 250 firm Britvic (LSE: BVIC) is one of three stocks I’ll consider buying if and when funds becomes available. Although not completely immune from wider economic wobbles, the drinks industry tends to be more resilient, given that its low-ticket items tend to be bought out of habit.
Indeed, this degree of earning predictability has allowed the owner of brands such as Tango and Robinsons to keep throwing increasing amounts of money back at its investors nearly every year.
In 2024, the forecast yield currently stands at 3.4% — higher than that offered by the index as a whole.
Notwithstanding all this, one potential risk is that increasingly health-conscious consumers begin turning away from fizzy/sugary drinks. Lowers sales could effectively bring that run of annual rises to an end. At best, it might hinder the size of future hikes.
With this in mind, it seems prudent to spread my money around other stocks as well.
Bodycote
Some of that diversification could come from another FTSE stock that boasts solid dividend credentials, namely heat treatment processes provider Bodycote (LSE: BOY).
To be clear, a company that specialises in making metal “stronger, more durable, and more corrosion resistant” isn’t one that’s likely to ever grab the headlines.
Dividend-wise however, it’s just the sort of thing I’m looking for. We’re talking years and years of increases, not to mention the odd special payment along the way.
Currently, this trend shows every chance of continuing. Boasting a forecast yield not dissimilar to Britvic, Bodycote’s cash returns also look to be covered over twice by projected profit.
Then again, trading here’s arguably more cyclical, with demand from sectors such as energy, automotive and aerospace dictated by general economic sentiment.
Historically, Bodycote’s shown itself to be robust during such periods. But the future won’t necessarily mirror the past.
So what else could I buy (when funds permit) to help soften any blows?
Safestore
Last on my list is self-storage provider Safestore (LSE: SAFE). Again, Safestore operates in a completely different space to the other two mentioned here. This could make for a less volatile portfolio, at least in theory. As an investor, I also love the simplicity and predictability of a business plan that involves charging people to house their clutter.
On the other hand, it’s no secret that anything property-related has been in the doldrums for a while now. In line with this, Safestore’s share price has fallen 11% in the last 12 months. There’s a chance it could have further to fall if the Bank of England keeps delaying its first interest rate cut.
So long as I’m being paid to be patient however, any drop in the value of my stake isn’t likely to concern me. A 3.6% yield feels like decent compensation, especially as Safestore’s also gaining a reputation as a dividend grower par excellence.
And if/when the UK market does start motoring again, there could be a nice capital gain too.
