When I think about building a long-term second income, I tend to think of FTSE 100 stocks. But there are some big yields on the FTSE 250.
I could see myself dedicating a year’s Stocks and Shares ISA cash to the smaller index. And if I could invest the full ISA allowance, these three would be candidates.
Investment
Liontrust Asset Management (LSE: LIO) has a forecast dividend yield of 11.6%.
Should you invest £1,000 in Liontrust Asset Management Plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Liontrust Asset Management Plc made the list?
I’m wary of such a big yield. And I do think there’s a chance it could be cut. Still, analysts have it steady between now and 2026, even if I might not quite share their confidence.
Liontrust suffered after the wheels came off its acquisition strategy, and that will have hurt sentiment. And investors can be fickle when it comes to second chances.
But forecasts show earnings slowly rising in the next few years, with the price-to-earnings (P/E) ratio coming down to under 10.
The dividend might not be covered by earnings. But even if we have a cut, we could still see a very attractive yield.
Bank
OSB Group (LSE: OSB) offers a dividend yield of 9.7%. And forecasts show it climbing as high as 12.5% by 2025.
What’s more, the City seems to think the cash will be well covered by rising earnings. So why do the shares look so cheap?
I mean, we’re talking about a P/E of 5.2, dropping to under three by 2025. That’s either a steal… or there’s some very big risk here.
Actually, I think it might be both. OSB is a specialist mortgage lender, active in the buy-to-let sector, among others. I can see why investors might not be so keen on that right now.
But if it can get through the mortgage crisis, I think OSB could make a nice addition to a second income portfolio.
REIT
The real estate panic won’t be doing a lot for Supermarket Income REIT (LSE: SUPR) either.
It’s a real estate investment trust, and it does what its name says. It invests in supermarket properties to earn a rental income stream for its shareholders. And, unsurprisingly, the market has not been kind to the REIT‘s shares in the past 12 months.
But the weakness has pushed the expected dividend yield up to 8.1%.
As an investment trust, it can use cash from better years to keep the dividend going in weaker years. And this year should be weak, with a loss on the cards.
But the City expects there’ll be a bounce back in 2024, and a restart of earnings and dividend growth.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Income
These three combine for an average dividend yield of 9.8%. At that rate, if I buy more shares with the dividends each year, I could end up just a few pounds short of £51,000 in 10 years.
And at the same return, that could generate my second income of £4,992 per year.
These are risky dividends though. So things could vary a lot. But I think it shows that we could earn good long-term income from UK dividend stocks.
