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Dividend stocks can be a great choice for investors looking to earn a second income. Unlike another job or a side hustle, there’s genuinely no work involved.
For UK investors, there are some companies that come with outstanding track records of consistently returning cash to shareholders. And I think they’re well worth considering.
Diageo
Diageo (LSE:DGE) is a stock in transition. The company has faced some challenges recently, but the compensation for this is that investors who buy the stock today get a 4.5% dividend yield.
That’s around the highest it’s been in the last 10 years, which is worth taking note of. And the firm still has a strong brand portfolio with leading products in several categories.
The firm has recently appointed a new CEO and is looking to tackle some of the challenges it has been facing. These include weak consumer sentiment and trends from younger drinkers.
Times are tough, but Diageo has weathered storms before. And if it can come through the other side, investors who buy the stock now could be well rewarded in terms of dividends.
Croda International
One thing that immediately jumps out about Croda International (LSE:CRDA) is that its dividend isn’t actually covered by its earnings. That’s a big risk right now.
The market, however, knows this and is offering the stock with a 4% dividend yield right now. And no company manages to achieve 30 consecutive years of dividend growth by accident.
In Croda’s case, it’s the result of an arsenal of patent-protected chemicals that are used in a variety of applications. In some cases, they’re even specified by regulation.
That’s a strong position to be in. And while weak demand from end markets has been weighing on profits and cash flows recently, this might be a good time to consider buying.
James Halstead
James Halstead (LSE:JHD) isn’t a household name, but that doesn’t mean investors should simply ignore it. And they definitely shouldn’t overlook its 49-year record of dividend growth.
The firm is a supplier of industrial flooring for specialist settings such as hospitals. These often have to met specific technical requirements and this creates a barrier to entry.
Despite this, the company has to compete with larger operators and this is a key risk. So far, though, James Halstead’s reputation for quality has allowed it to generate consistent growth.
The company’s earnings only just cover its dividend right now. But I don’t know where else investors can get a 6.5% yield with a growth record stretching back almost half a century.
UK dividends
I think the UK stock market has some interesting opportunities for dividend investors. Especially ones who are prepared to be brave in the face of short-term challenges.
A good way of looking to limit the overall risk is by diversification. Investing across a range of stocks from different industries and geographies can reduce the impact of specific threats.
When it comes to attractive valuations and strong track records, I think the UK market is hard to beat. And that’s where I think investors should start their searches.
