Collecting a second income from dividend stocks is an attractive proposition. And although I don’t have spare money to invest right now three stocks would be on my radar if I did.
The energy sector
The first is Renewables Infrastructure (LSE: TRIG). And with the share price near 113p, the forward-looking dividend yield is just under 6.5% for 2024.
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The company has onshore and offshore wind assets as well as solar energy and battery storage projects.
The multi-year dividend record is solid. There were no cuts – even through the pandemic. And the compound annual growth rate (CAGR) of the shareholder payment is running at about 1.5%.
That’s not big growth. But for me, it’s the consistency that counts. And the record on operating cash flow is impressive with a CAGR of about 5.7%.
However, there are risks for investors, as with any business. One is that maintenance costs may rise as the underlying assets age. And another is that weather conditions cause the assets to produce lower amounts of energy and cash flows in the future.
Nevertheless, the share price has been weak. And this is a good time to research the business.
Financials
But I’m also keen on financial technology and trading platform provider IG Group (LSE: IGG).
A spread-betting provider may not be the first stock the conservative investor thinks about. But speculation is as old as the hills. And investors and traders will likely always be drawn to speculate on stocks and other instruments.
Meanwhile, IG’s dividend record suggests that providing people with the means to back their speculative views has been a lucrative business. The CAGR of the shareholder payment is running at almost 6.5%. And IG kept up the dividends through the pandemic years.
But there are risks. Some recent research suggests investors are falling in love with the idea of long-term investing again. And that could lead to a migration away from short-term strategies and the possibility of decreasing revenues for companies such as IG.
However, City analysts are predicting modest single-digit percentage annual increases for both earnings and the dividend in the current trading year.
But another risk is that regulators may move the goal posts and make profits harder to achieve for the company.
Nevertheless, with the share price near 683p, the forward-looking yield for the current trading year is just above 6.9%. And I see that valuation and the level of potential income for my portfolio as attractive.
A good pairing?
But I’d be inclined to balance an investment in IGG with another in the shares of Hargreaves Lansdown(LSE: HL).
The company is a digital wealth management service administering company. And that means it operates as something of a supermarket for equity funds. But it also provides the SIPP and ISA accounts investors need in which to hold stocks, shares and funds.
Not many years back, the business was fast-growing. But now it’s more of a cash-cow. And one risk is the sector is more competitive than it once was.
However, I reckon Hargreaves Lansdown has a good chance of holding its own in the industry and churning out dividends for years to come.
Meanwhile, with the share price near 789p, the forward-looking dividend yield for the trading year to June 2024 is around 5.8%. And I think that’s attractive.
