While I do own some growth stocks, most of the companies in my Self-Invested Personal Pension (SIPP) are designed to generate a second income when I retire. I bought them all with a long-term view, hoping I never have to sell. Particularly these three.
The UK financial sector’s a great source of dirt cheap, high-yield income stocks. FTSE 250-listed retirement planning adviser Just Group‘s (LSE: JUST) a hidden gem with supersized potential, in my view.
My forever shares
I added it to my SIPP on 13 November, and the share price has jumped 24.56% since then. It was boosted by 2023 results, published on 8 March, which showed a 47% jump in underlying operating profits to £377m. Over 12 months, the share price is up 17.33%.
Just is incredibly cheap, trading at just 3.07 times earning. At 2.33%, the dividend’s lower than I can get from rival Legal & General Group. But not to worry, I hold that too for diversification. I’m hoping Just offers more growth potential.
Profits have been boosted by annuity sales, which I’m worried may fall once interest rates slide. I’m also concerned by today’s low valuations for UK financials. Investors don’t seem to fancy them. I’m hoping for a re-rating but I may have to be patient.
I bought paper and packaging group Smurfit Kappa Group (LSE: SKG) last June, shortly before its shares plunged when markets decided it had overpaid to acquire US-based rival WestRock. I responded by purchasing more Smurfit stock at the lower price. Even if the board did pay over the odds, I thought it was worth the risk to expand its operations stateside.
Overall, I’m up 15.95% on my two purchases. Over one year, Smurfit shares have climbed 18.63%. The stock’s forecast to yield 3.87% this year, rising to 4.25% next year. I’m hoping my income will continue to rise over time.
There are risks. Smurfit will have to work hard to comply with environmental demands on packaging. Perhaps today’s delivery culture will fade and die, who knows? But I still think this is one for the long-term.
I bought housebuilder Taylor Wimpey (LSE: TW) on three occasions last year. I decided it was too cheap to ignore, trading around six times earnings, while the 7%-plus yield was irresistible.
No plans to sell
The shares made a strong start rising 20% in short order. It’s struggled lately, as it looks like interest rates will stay higher for longer. The share price is up just 2.89% over one year. Over five years, it’s down 27.29%.
Taylor Wimpey could be a value trap, but I don’t think so. Given the UK housing shortage, I’m hoping prices will pick up once interest rates finally start to fall. Taylor Wimpey is forecast to yield 7% this year, which should underpin my second income plans, but I’ll admit I’m worried to see cover shrink to just 0.9.
Never mind. I want exposure to housebuilders and this is my choice. I plan to hold throughout the current property cycle, the next one and beyond. Building a second income takes time but I reckon UK dividend stocks are the best way to do it.
The post Lifetime second income! 3 FTSE stocks I hope I’ll never have to sell appeared first on The Motley Fool UK.
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Harvey Jones has positions in Just Group Plc, Legal & General Group Plc, Smurfit Kappa Group Plc, and Taylor Wimpey Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.
