There are many ways to build a second income. One of the easiest however, is to invest in dividend shares. These pay out cash (from company profits) to investors on a regular basis.
Interested in building a portfolio of dividend shares that can generate a healthy level of income for the foreseeable future? I think an investment in these three companies could be a good place to start.
Rising dividends
Unilever (LSE: ULVR) is the first stock I want to highlight. It’s the owner of Dove, Domestos, Knorr, and a whole lot of other well-known consumer brands (that consumers buy repeatedly).
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If I was looking to build an income portfolio today, this is one of the first shares I’d pick. The yield here is not super high (it’s currently about 3.7%). However, the company is a very reliable dividend payer which it has consistently increased over the years.
Looking ahead, I expect Unilever to continue raising its payout. This is a company that is quite profitable. And it can reinvest its profits to generate future growth.
The risk here is that Unilever’s brands lose their appeal. I don’t see this happening personally, as its many and varied portfolio of products have been popular with consumers for decades. However, we can’t rule out such a scenario.
A cash cow
Next is Legal & General (LSE: LGEN), a financial services company that offers insurance, investment management, and retirement solutions.
Now this stock does have a high yield. This year, Legal & General is expected to pay out dividends of 20.4p per share. That puts the yield at about 8.6% at today’s share price.
What I like about this high-yielder however, is that it also has a solid dividend track record. The company has increased its payout every year since 2010. And it plans to keep doing so in the years ahead.
It’s worth pointing out that Legal & General’s share price can be volatile at times. It could fall from here if stock market volatility returns, or the company’s future results are disappointing.
But I think the stock looks attractive at its current levels.
Dependable income
Finally, I think Tesco (LSE: TSCO) could also be a great investment for those looking to build a second income. It’s the largest supermarket operator here in the UK.
Why Tesco? Well, it’s a pretty stable company. People will always need to buy food and drink, even in an economic downtown. So, in theory, it should be a reliable dividend payer going forward.
The yield here is also quite attractive. Currently, it’s a little over 4%. And the payout has been rising in recent years.
Of course, Tesco does face some risks. Competition from discount supermarkets such as Aldi and Lidl is one. These companies could continue to steal market share, putting pressure on the company’s margins and profits.
Overall however, I think the stock is a solid choice for those seeking income from shares.
