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Freetrade thinks these 3 ‘alternative’ dividend stocks are worth a second look

Freetrade thinks these 3 ‘alternative’ dividend stocks are worth a second look
Image source: Getty Images.

It can sometimmes be difficult to find original and unique ways to invest your money. Although stocks that pay dividends are sometimes thought of as a boring option, that’s not always true.

Freetrade has put together some alternative income investment choices that you may not have considered. Let’s take a look at the Freetrade team’s interesting dividend suggestions.

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What are dividend stocks?

Before diving in, it’s worth quickly clarifying what dividend stocks are.

This just means that the company or fund rewards investors by paying them some money. The amount paid is known as the dividend yield. This yield is calculated as a percentage of the share price.

Many companies that pay dividends try to keep payments steady to give investors a certain level of stability. But it’s worth remembering that there is no guarantee when it comes to dividend payouts. Sometimes they can change drastically. This was something we saw happen a lot last year.

What are some alternative dividend stocks?

People often associate dividends with more traditional companies rather than exciting new businesses.

However, there are some surprising places you may be able to find stocks that pay dividends. Here are some areas that Freetrade suggests may be worth checking out:

1. Music royalties

We all love a good tune. But how about making money from music? What if I told you that you can earn without ever having to get up on stage, record an album or even play an instrument?

Investing in firms like Hipgnosis Songs is a cool way for investors to become music moguls. The company has been buying rights to some pretty big tracks from artists like Justin Bieber, Rihanna and Beyoncé.

By investing in a company like this, you can get a share of the royalties. This dividend stock pays a decent yield to the tune of 4%. Music to your ears I’m sure.

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2. Renewable energy

You have probably noticed there’s been a big green transformation. It’s a movement that has seen lots of funding pouring into sustainable energy companies.

How about getting a slice of all that good green energy? Rather than trying to pick the next big titan of industry, you can use an investment trust to become an owner of multiple businesses.

The dividend stock Freetrade suggest taking a look at is the Renewable infrastructure Group. They allow investors to put money into around 70 renewable energy companies. What’s even better for income-focused investors is their 5% dividend yield.

3. Social housing

This is an area that many investors don’t realise they can support and make money from.

Another opportunity to receive a 5% dividend yield comes from Civitas Social Housing, a real estate investment trust (REIT) and a FTSE 250 company providing inflation-linked returns to investors.

By investing in a trust like this, investors can receive a notable dividend whilst still focusing on ESG investing.

How do I invest in dividend stocks?

If dividend investing seems interesting to you, it’s so easy to get the ball rolling.

Using a share dealing account, you can choose individual companies or investment trusts and funds that focus on dividends.

Reinvesting dividend income is a great way for smart investors to benefit from compound interest over time. Just remember that all investing carries risk. Although dividends are generally quite stable, things aren’t always smooth sailing.

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