In recent days, I’ve freed up about £500 of cash from sales of other investments. To that end, I’ve been thinking about how to invest it. I’m looking at buying two dividend shares, primarily to derive a passive income stream. Let’s take a closer look.
A smoking hot yield
The first company, Imperial Brands (LSE:IMB), has a dividend yield of 7.26%. For the year ended September 2021, the tobacco firm paid a total dividend of 139.08p. The shares are trading at 1,903.5p.
For the six months to 31 March, the business reported that revenue fell by 1.3% and operating profit declined by 26.6%.
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This is an indication of how wage and cost inflation are beginning to impact the company’s balance sheet. But I do consider this a short-term issue.
In the same report, net debt was down from £11bn to £9.7bn. This suggests that the firm is becoming leaner and increases the possibility of expansion projects, given the lighter debt pile.
Additionally, it paid an interim dividend of 42.54p per share, a 1% increase year on year.
The business has been focusing on investing in its sales across the UK, US, and Australia. In these regions, it’s seen 0.25% growth in aggregate market share.
What’s more, the firm has operating cash flow of £2.63bn, meaning that it should be able to overcome any issues that arise in the short term.
Solid sales growth
Second, GSK (LSE:GSK) paid a total dividend of 80p per share in 2021, amounting to a dividend yield of 7.42%. The shares are currently trading at 1,330.2p.
For the three months to 30 June, the pharmaceuticals firm announced that sales increased by 13%. This amounted to £6.9bn.
Furthermore, adjusted operating profit grew by 22% to £2bn. The business also stated that it was lifting its full-year guidance, while expecting full-year sales to grow between 6% and 8%. This growth, though, isn’t guaranteed.
As a potential investor, I find these recent results exciting and indicative of good times ahead for the company. These results come after the public listing of GSK’s consumer healthcare segment, Haleon.
GSK is, however, fighting litigation involving personal injury claims. These concern the Zantac heartburn drug. This case could potentially cost $17bn, but Citi says legal developments may reduce the firm’s exposure. The amount may be significantly less than this.
In any case, the business has operating cash flow of $10.51bn. This should enable the firm to sail through any difficulties that may arise from the litigation.
Overall, both of these companies are well-established and boast attractive dividend yields. Both are focused on expansion, which I consider appealing. As such, I’m going to take my £500 and buy the shares of both companies to target an income stream through dividends. I’ll be adding the shares to my portfolio soon.
