During times of uncertainty, the premise of generating a second income is very appealing for investors. One way this can be achieved is via dividend stocks. Dividend stocks pay out regular cash that can be used either to reinvest or to spend straight away. Given the market volatility over the past month, here are two examples that look attractive to me.
Dealing with volatility
Man Group (LSE:EMG) stock has dropped by 20% over the past month, helping to push up the dividend yield to 7.91%. Over the past year, it has fallen by 34%. The London-based active investment management firm has struggled with the recent wild swings in the markets, which is the main reason for the short-term decline.
The firm makes money through charging fees on the assets under management. So if investors decide to pull their money out of the funds, Man Group ultimately makes less money. In a trading statement last week, the business said it expects to have lost around £4.2bn so far in April from people moving money out.
Even though this is concerning and a risk going forward, the business has a track record of success in fund management. Therefore, I believe that when the dust settles, people will calm down and look to reinvest in the market, which should help the share price rally back.
In terms of income, it has consistently paid a dividend for over two decades. It has been through challenging market conditions before and still paid out dividends, so I don’t see this time as being any different.
Still integrating
Another idea is Rathbones (LSE:RAT), which has a 6.21% yield. Interestingly, last month, it appointed former Man Group CFO Jonathan Sorrell as its chief executive designate.
The stock has taken a 13% hit in the past month, but is only down 5% in the last year. Part of the short-term fall has come from the integration friction with the Investec Wealth & Investment division. However, I see this as something that will pass. In the long run, it has the potential to make the business more efficient and also more profitable.
The 2024 results showed a sharp 72% jump in the profit before tax figure. The funds under management increased, although this factors in money from the Investec purchase, so I’m looking past this for now. Ultimately, the total dividend for the past year has been 93p. This marks an increase from the 87p last year and 83p the year before that. The trend of income payments is clearly higher and I don’t expect this to stop anytime soon.
One risk is that (like Man Group), Rathbones is sensitive to investors pulling money out. Although it’s too early to say, if volatility persists, the following quarterly results could show a fall in assets held, which could put some investors off.
I think both stocks represent a good buying opportunity for income investors to consider right now, given the drop in the past month has helped to push up the dividend yield.
