Even though we’re now in August, there’s still almost five months to go before we close out the year. As a result, I don’t want to get too distracted by summer holidays and rather want to keep focused on ideas for second income generation.
One way I’ve used for a while is making and reinvesting dividends from stocks. Here are two ideas that are top of my watchlist right now.
A rare monthly income option
The first one is the TwentyFour Select Monthly Income Fund (LSE:SMIF). It has a current dividend yield of 8.77%, with the share price up 15% over the past year.
It’s a unique stock as it pays out income each month. Usually, companies pay out income once or twice a year. Yet the fund manager, TwentyFour, is able to achieve monthly payments thanks to the broad portfolio of bonds and other debt products that it owns.
It aims to buy undervalued bonds and income generating assets to deliver a dividend of at least 6% per year. The fact that this is one of the primary goals of the fund makes it very appealing for an investor like me that has that specific aim.
Aside from the high yield and the consistent monthly cash flow, I also like the stock because it focuses on investing with strict ESG criteria. This means that the companies it deals with make a clear effort with regard to environmental, social, and governance goals.
As a risk, some of the bonds and other credit products are illiquid. That means that it’s not easy to buy or sell them quickly. This could pose a problem if the firm needs to act quickly.
The potential comeback kid
A second stock that has caught my eye is abrdn (LSE:ABDN). The stock is down 28% over the past year, with a current dividend yield of 8.7%.
Don’t get me wrong, the business has been struggling for several years. It has seen investors pull money out of the funds, with general macroeconomic uncertainty blamed. However, in my view some of the blame also lies internally, with the firm not that well run.
Although continued outflows of client money remains a risk, the departure of the CEO Stephen Bird at the end of June could be a catalyst for change. His four years at the company unfortunately correlate well with the demise of the share price. A change at the top, to shake things up and start a transformation, should be a really good thing.
Recent indications also point to a turning point. Q1 assets under management (AUM) grew by £800m, in contrast to the same quarter a year before which saw AUM drop by £6.2bn.
For income investors, I’m not worried about an immediate dividend cut. The dividend per share of 14.6p has been the same since 2020. If the management team wanted to cut to save money, they would have done so already.
Therefore, when I put everything together, I think that it could be a great value buy right now. The dividend yield is high, and the current share price is low.
I like both ideas and have them on my watchlist to buy when I have free cash.
