With August drawing to a close, I have been looking forward to the coming month and trying to scout for some potential bargains for my portfolio. Here are two dividend stocks I would be happy to buy in September if I had spare cash to invest.
Altria
US tobacco giant Altria (NYSE: MO) recently announced yet another increase in its annual dividend. That means the Dividend Aristocrat now has a continuous run of annual increases stretching back over half a century.
With famous brands such as Marlboro in its US portfolio, the company is a free cash flow machine. It has been good at using those flows to reward shareholders in the form of dividends.
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The shares currently yield 8.8%. While dividends are never guaranteed, I expect the company will try to extend its long run of annual increases in years to come.
What could go wrong? One obvious risk is the declining popularity of smoking cigarettes in the company’s key markets.
Altria has been less impressive than some rivals in finding promising new revenue streams. For now, I think the cigarette business looks set to continue generating big profits. But I will be keeping an eye on how Altria reshapes its non-cigarette portfolio in the coming years.
Income & Growth
Income & Growth VCT (LSE: IGV) is a venture capital trust that invests in up-and-coming businesses. It then often holds its stake for years, hoping to sell at a profit. That strategy has worked well for years — and allowed the trust to make generous dividend payments.
The yield currently stands at 11.3%. But an important factor to understand when it comes to Income & Growth shares is that the dividend tends to move around quite a bit.
The trust aims to pay a dividend of at least 6p per share each year (although, like all dividends, this is never guaranteed).
Its interim dividend alone this year was 4p per share, so I expect the full-year payout to be higher than 6p. Given that the shares currently trade for about 71p each, I think it means this could be a very rewarding dividend stock to add into my portfolio.
How the trust performs in coming years will depend on the performance of its underlying investments. One risk I see is that a challenging economy makes it harder for young companies to grow. That could mean Income & Growth holds onto its stakes for longer, reducing the flow of funds available to pay dividends.
As a long-term investor though, I am already used to taking the long view. So an ebb and flow of dividends from Income & Growth would be fine by me if, overall, owning the share offered me a substantial passive income opportunity in years to come.
