Three UK stocks currently look like terrific opportunities to earn a second income this year. That’s because, despite the macroeconomic headwinds, these companies continue to generate cash like there’s no tomorrow. As such, even with rising yields, the dividends keep on growing.
Home renovations set to rise
With interest rates finally starting to tumble, the pressure on household wallets is starting to ease. Obviously, there remains a long way to go before returning to a low-interest-rate environment. However, as conditions improve, so does the demand for, and affordability of, renovations.
At least, that’s what Howden Joinery’s (LSE:HWDN) results show. The fitted kitchen specialist is on its fourth year of dividend hikes since the pandemic threw a massive spanner in the works. And even with higher interest rates dragging down performance, management has continued to successfully grow revenue and profits through new product launches and operational optimisation.
The group does remain susceptible to swings in commodity prices, especially timber. And the competitive landscape’s heating up as more companies seek to capitalise on the rising opportunities. But with a wide moat and well-funded balance sheet, I think this company’s more than prepared to take on such challenges and so is worth considering for a portfolio.
Electronics demand also set to rise
One of the under-the-radar sectors to be hit by higher interest rates is electronics. It turns out that demand for expensive electronic devices such as TVs, computers and cars hasn’t been very high lately. And for RS Group (LSE:RS1) that’s proven to be quite a drag.
Having only recently completed a massive acquisition to expand into the European electronics space, the firm’s quickly suffered a slowdown in sales and profits. Yet cash generation’s remained strong. So much so that dividends are still getting hiked, bringing the total number of years of consecutive increases to eight. That’s a desirable trait when seeking to build a sustainable second income.
The good news is we’re already seeing early signals of a cyclical upturn within the electronics sector. That puts this specialist component supplier on track to enjoy a significant rebound if management’s able to successfully capitalise on the opportunity.
But knowing exactly when the winds will start shifting in RS Group’s favour’s anyone’s best guess. And should it take longer than expected, the pressure on profits could adversely impact dividends. Nevertheless, at its current cheap valuation, that’s a risk I feel might be worth taking.
Complicating trade routes
For most businesses, the disruptions of shipping lanes through the Suez Canal have been an exceptional headache. For Clarkson (LSE:CKN), it’s been a blessing. With so many logistical shake-ups occurring in the shipping industry, this shipping broker is having little difficulty generating cash flow.
Increased demand for its data analytics platform, paired with higher shipping rates, is proving to be a powerful catalyst. Obviously, the cyclicality of the shipping industry poses a threat. However, management’s navigated such downturns numerous times and subsequently maintained shareholder dividends throughout, securing its place as a Dividend Aristocrat.
The yield may not be as attractive as Howden or RS Group. But with more than 20 years of dividend hikes under its belt, it could expand significantly in the long run. That’s why I’m eyeing this business as the next potential addition to my income portfolio.
The post I’d buy these 3 FTSE shares to earn a second income appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
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This FTSE 100 hidden gem is quietly taking things to the next level
Zaven Boyrazian has positions in Howden Joinery Group Plc. The Motley Fool UK has recommended Clarkson Plc, Howden Joinery Group Plc, and Rs Group 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.
