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Owning dividend stocks is a way to increase my passive income. High-dividend stocks can give me an attractive source of income without working for them.
However, dividends are never guaranteed and stock prices can fall. So I’ve always spread my investment across a variety of stocks. Here are two high-dividend stocks I would happily buy for my portfolio today.
5 actions to try to create wealth after 50
Markets around the world are reeling from the current situation in Ukraine… and with so many big companies trading at what appear to be “discounted” prices, now may be the time for savvy investors to grab some good potential business.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect in these unprecedented times.
Fortunately, The Motley Fool UK analyst team has shortlisted five companies that they believe STILL offer significant long-term growth prospects despite the global upheaval…
We’re sharing the names in a FREE special investment report that you can download today. We think these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50s.
The tobacco industry is controversial. Many investors avoid it because of the damage its products inflict on millions of customers. For those willing to invest, however, the industry has an attractive economy. Strong cash flow can help support big dividends.
There are a number of tobacco companies that I would consider buying for my portfolio, including those based in the United States Altria and Philip Morris International alongside British peers British American Tobacco and Imperial Marks.
Among these, the most productive are the imperial marks. Its dividend yield is 8.3%. This means that if I invested £1,000 in M&G shares today, I would expect to receive £83 in dividends per year.
High Dividend Stocks
Why is Imperial’s performance superior to that of major competitors? It has pushed less aggressively than them toward non-cigarette formats like vaping, so falling cigarette sales could pose a bigger threat to its future revenue and profits. Additionally, Imperial’s brands like Rizla and John special player are strong but not as iconic as names belonging to competitors like Marlboro and Stroke of luck.
But I think that’s already factored into the stock’s price and performance.
Although Imperial’s portfolio of brands may not be the best in the industry, I believe it is sufficient to help the company achieve substantial profits. Profit after tax last year was £2.9bn. I also like Imperial’s wide geographic reach. It may have to work harder to develop a post-cigarette future at some point, but waiting for competitors to establish the market first could actually save it substantial up-front marketing expenses. Imperial is among the high dividend stocks I would consider for my portfolio today.
Another stock I would buy for my portfolio is investment manager M&G (LSE: MNG).
M&G’s yield is 8.4%, which means it offers me a similar level of payout as Imperial. I don’t see the same risk of decline in end markets as in tobacco. On the contrary, I expect customer demand for financial services to increase over time. But this can bring its own challenges, such as increased competition. This could squeeze profit margins.
I view M&G’s well-established brand and long history as a competitive advantage when it comes to attracting and retaining customers. He deals with such large sums of money that even small commissions could help him turn a handy profit.
Management said it plans to maintain or increase the dividend going forward. This is never guaranteed, but hopefully the business economics will allow the company to realize this plan. That’s why I’d be happy to buy more M&G stocks to add to my ISA’s high-dividend stocks.