Three UK stocks currently look like terrific opportunities to earn a second income this year. That’s because, despite the macroeconomic headwinds, these companies continue to generate cash like there’s no tomorrow. As such, even with rising yields, the dividends keep on growing.
Home renovations set to rise
With interest rates finally starting to tumble, the pressure on household wallets is starting to ease. Obviously, there remains a long way to go before returning to a low-interest-rate environment. However, as conditions improve, so does the demand for, and affordability of, renovations.
At least, that’s what Howden Joinery’s (LSE:HWDN) results show. The fitted kitchen specialist is on its fourth year of dividend hikes since the pandemic threw a massive spanner in the works. And even with higher interest rates dragging down performance, management has continued to successfully grow revenue and profits through new product launches and operational optimisation.
The group does remain susceptible to swings in commodity prices, especially timber. And the competitive landscape’s heating up as more companies seek to capitalise on the rising opportunities. But with a wide moat and well-funded balance sheet, I think this company’s more than prepared to take on such challenges and so is worth considering for a portfolio.
Electronics demand also set to rise
One of the under-the-radar sectors to be hit by higher interest rates is electronics. It turns out that demand for expensive electronic devices such as TVs, computers and cars hasn’t been very high lately. And for RS Group (LSE:RS1) that’s proven to be quite a drag.
Having only recently completed a massive acquisition to expand into the European electronics space, the firm’s quickly suffered a slowdown in sales and profits. Yet cash generation’s remained strong. So much so that dividends are still getting hiked, bringing the total number of years of consecutive increases to eight. That’s a desirable trait when seeking to build a sustainable second income.
The good news is we’re already seeing early signals of a cyclical upturn within the electronics sector. That puts this specialist component supplier on track to enjoy a significant rebound if management’s able to successfully capitalise on the opportunity.
But knowing exactly when the winds will start shifting in RS Group’s favour’s anyone’s best guess. And should it take longer than expected, the pressure on profits could adversely impact dividends. Nevertheless, at its current cheap valuation, that’s a risk I feel might be worth taking.
Complicating trade routes
For most businesses, the disruptions of shipping lanes through the Suez Canal have been an exceptional headache. For Clarkson (LSE:CKN), it’s been a blessing. With so many logistical shake-ups occurring in the shipping industry, this shipping broker is having little difficulty generating cash flow.
Increased demand for its data analytics platform, paired with higher shipping rates, is proving to be a powerful catalyst. Obviously, the cyclicality of the shipping industry poses a threat. However, management’s navigated such downturns numerous times and subsequently maintained shareholder dividends throughout, securing its place as a Dividend Aristocrat.
The yield may not be as attractive as Howden or RS Group. But with more than 20 years of dividend hikes under its belt, it could expand significantly in the long run. That’s why I’m eyeing this business as the next potential addition to my income portfolio.
