I reckon dividend shares are one of the best (and least challenging) ways of supplementing my existing income.
Of course, this money can never be guaranteed. That’s why it pays to identify those companies that have a better record than most of consistently returning cash to shareholders.
I’ve found two options from the FTSE 250 that probably fly under many peoples’ radars and which I’d be tempted to buy for my own portfolio if I had the funds to do so.
Should you invest £1,000 in Clarkson Plc right now?
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Reliable dividend share
At first glance, Clarkson (LSE: CKN) doesn’t get the pulse racing. The £900m market cap business provides brokerage services to the shipping industry. In other words, it brings together those who want to move goods across the oceans with those who own the ships.
On the flip side, the predictable nature of what Clarkson does makes it a stable source of dividends. As evidence of this, the firm has a great record of hiking its annual payout every year for decades.
At 3.3%, the forecast yield might seem fairly average. In fact, it’s near-identical to that generated by the FTSE 250 index as a whole.
However, this cash return looks set to be covered twice over by profit this year. This suggests it’s unlikely to be cut.
Moreover, Clarkson shares don’t feel ludicrously expensive.
Actually, a price-to-earnings (P/E) ratio of 13 for the 2023 financial year feels reasonable given the above-average margins and returns on capital it’s been delivering.
Don’t forget to diversify
Any drawbacks? Well, even shipping-related firms like this are susceptible to the occasional ‘black swan’ event. Covid-19 would be an example.
Although certainly higher than it was five years ago, this is also not a company that is about to generate big, tech-style capital gains.
Still, I reckon a stock like this could provide a nice bit of (essential) diversification to a portfolio.
I’ve added Clarkson to my watchlist for now
Money for ‘nothing’
Another FTSE 250 dividend share that I think many retail investors possibly overlook is self-storage operator Safestore (LSE: SAFE). Even those who are aware of it might think it’s simply too boring.
But ‘boring’ can be a great attribute in investing. For me, the idea of charging people to dump possessions in a unit for a period of time — during which I’m required to do nothing more than ensure they’re protected — is a winner. This is partly why Safestore, like Clarkson, has become another reliable dividend hiker.
Again, a 3.5% yield is reassuringly solid rather than eye-wateringly high. As experienced Fools will attest, the latter can often be a sign that the market is concerned about a company’s health.
I really don’t think that’s the case here. That said, Safestore did recently report a fall in half-year pre-tax profit due to a “lower gain on investment properties“. This may be why the shares have lost some momentum.
On sale?
On a positive note, the dip in price has succeeded in bringing down the valuation. This became somewhat detached from fundamentals during the post-lockdown ‘buy-anything-and-it-will-go-up’ bull market of 2021.
No stock is worth buying at any price so I’m glad I didn’t pull the trigger back then. Today, however, this dividend share is looking increasingly more alluring.
I’m placing Safestore, like Clarkson, on my watchlist for a potential investment.
