Income stocks have offered some attractive yields in 2023. As a whole, I don’t see this changing in 2024, which is why I’m adding more dividend ideas to my watchlist this month. Here are three that I’ve noted down this week that could add an additional £249 in second income.
Something hot off the press
At 4.65%, the dividend yield on Games Workshop isn’t exceptionally high. Yet it’s still above the FTSE 250 average. The stock has taken a short-term nosedive following the release of a trading update.
Even though there are some concerns about lower licencing revenue and higher employee bonuses, I think the fall is an overreaction. The drop of 10% in early trading today (7 December) is something I’m going to closely monitor in coming weeks. Any further drop would represent a good opportunity, in my eyes, to add this to my portfolio.
The business is expecting good year-on-year growth in revenue and profit after tax. This should continue to support regular dividends to be paid over the coming year and beyond.
Brick by brick
Next I’ve added two shares that are both closely linked to the property sector. Travis Perkins and Redrow are on my watchlist.
Travis Perkins has a dividend yield of 5.01%. The DIY and builders merchant has a low net-debt-to-adjusted earnings ratio of 2.1 times. This is combined with strong levels of free cash flow (£58m in H1 2023). Both these factors make the stock a good dividend purchase, in my opinion.
Redrow focuses on home construction. It’s true that the annual dividend was cut slightly from 32p last year to 30p this year. I see this as more of a precautionary measure, given that underlying profit before tax for the fiscal 2023 year (which ran through to 2 July) was down by 4%.
I feel that homebuilders will perform better in 2024, thanks to potential interest rate cuts and lower mortgage rates. As a result, I think the current yield of 5.41% is stable, and could even look to increase.
Putting the numbers together
If I assume that I invested the same amount in each of the three ideas, my average yield would be 5.02%. Starting in January, let’s also assume that I invested £100 each month in each stock. If I keep this up and reinvest the dividend income I make, my overall pot can grow quickly.
After 12 years, my pot size could stand at just under £60,000. In the following year, I could stop investing new money and enjoy £249 in average income each month.
Of course, the risk is that these three stocks underperform. For example, if the UK has a steep recession, the property sector could be down in the dumps for a while.
I can’t avoid these risks, but if I include the three as part of a larger income portfolio, I can be more diversified and less reliant on just a few stocks.
The post Buying these 3 income stocks could make me £249 a month appeared first on The Motley Fool UK.
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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Games Workshop Group Plc and Redrow Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
