Making a second income is an attractive goal for many people. It’s actually easier to achieve than some might think, especially when making use of dividend shares from the stock market. A diversified portfolio with many stocks is the best option, with one stock catching my eye. Considering it could be a key step for this strategy.
Key details
I’m talking about HICL Infrastructure (LSE:HICL). The FTSE 250 investment company focuses on owning and managing core infrastructure assets. These are essential real assets that underpin sectors including transport, utilities, renewable energy and communications. These feature a mix of public-private partnerships, such as hospitals and schools, alongside fully private-funded options, such as student housing.
Over the past year, the stock’s down a modest 3%. The dividend yield is 6.8%, making it well above the average yield for the FTSE 250. With a share price of 121p, this means that each share purchased provides just over 8p worth of dividends on an annual basis. Therefore, let’s assume an investor bought 10,000 shares of HICL. This would cost £12,100. Factoring in the current dividend yield would mean that over the next year, it could pay £822 in dividends.
Going forward, an investor could take the money received and reinvest it. Assuming the dividend yield stays the same, this would mean that in year five, the dividends received could grow to £1,113. This shows the power of compounding money over time.
Looking to the future
One of the main assumptions when projecting future dividends is that the company will continue to pay out. Unfortunately, this isn’t guaranteed. It mostly depends on the financial success of the firm. If HICL performs well, it’s logical to think that some of the earnings will go towards the dividends.
Fortunately, I think the signs for the future are positive for HICL. The management team recently reconfirmed the dividend guidance through to early 2026.
The annual report said: “The further increase in dividend growth reflects continued improvement in cash generation from the portfolio in the year with cash cover of 1.56x.” This means the dividend being paid is easily covered by cash balances.
Further, the stock should benefit as markets anticipate more interest rate cuts. The infrastructure assets offer predictable long-term cash flows. This becomes increasingly attractive to investors who are looking to move cash that’s not earning as much into alternative assets like stocks.
One risk is that some assets operate under long-term government contracts or regulations. Therefore, policy changes, funding cuts, or political intervention could reduce returns.
Even with this concern, I think it’s a stock for investors to consider, especially for those who are looking to build a second income. It can play a role being included in a dividend portfolio with other shares.
