Two ‘hidden’ income stocks that could help you retire a millionaire

Here are two great dividend stocks with share price appreciation thrown in too.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I always insist that when it comes to dividends, a long-term progressive one is better than a big one today that is unsustainable. I’ve identified two for you that I believe should provide years of rising income — but do be careful and be sure to do your own research first.

Wealth generates profit

If I showed you a company that has nearly doubled its annual dividend in five years, and has forecasts for big rises this year and next which would massively outstrip inflation and which should be amply covered by earnings, would you be impressed?

And what if I told you its share price had trebled over that same period, to 346p today?

Should you invest £1,000 in Fulcrum Utility Services right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Fulcrum Utility Services made the list?

See the 6 stocks

Well, that’s the recent track record of investment manager Brewin Dolphin Holdings (LSE: BRW). That stock market bullishness we’ve seen of late, fuelled by the fall in sterling, has helped make that look good. But over the five-year period, Brewin Dolphin shares have run massively ahead of the FTSE 100 overall — a good investment manager can be a nice way to gear up profits from a rising stock market.

Good so far

Interim results in May support the City’s predictions, with funds under management up 6.8% (against a 6.1% rise in the FTSE 100), and net discretionary inflows up by an annualised 7.6%.

Adjusted EPS gained 13%, which is well ahead of the mooted full-year rise of 7%, and the interim dividend was lifted by 10.4%.

We’re looking at a forward P/E of 15.6 for 2018, which I see as a modest valuation for a company whose dividend is expected to yield 4.7% that year. And the big share price rise we’ve already seen — well, I see that as a nice extra bonus for income seekers.

Top property share?

As dividend picks go, a company that only started paying them in 2016 might look like a strange one to plump for, but that’s deceptive.

And the commercial letting business might not sound very exciting (though if you want excitement, I’d say put your money into safe long-term investments and go bungee jumping). But that’s what CLS Holdings (LSE: CLI) does, and I reckon it does it pretty well.

The thing is, CLS has actually been redistributing cash to shareholders for years, in the form of buybacks — so those who wanted income would have to sell some shares to get it. But last year, after more than doubling its EPS over the previous five years, the company switched to a progressive dividend policy and shelled out for a 2.6% yield.

That’s a 23% increase in distributions over the previous year, and analysts are expecting the yield to reach 3.4% by 2018. Those rises are well ahead of inflation, and with strong cover by earnings, I can see an attractive long-term upwards trend here.

Oodles of cash

CLS aims to provide stable long-term cash flows, which is the lifeblood of any income investment. And along with 2016 results, executive chairman Henry Klotz spoke of the company’s “strong balance sheet and ample liquid resources“.

The share price has more than trebled over the past five years to 214p, though now that distributions have switched to dividends that’s likely to slow. We’re looking at P/E multiples of around 19, which might seem a bit high, but with a basic net asset value per share of 215p at December (adjusted for May’s 10-1 split), I’m seeing good value.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. 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.

More on Investing Articles

Older couple walking in park
Investing Articles

Could £300 a month invested in US and UK shares reach a million by retirement?

Could an investor retire with a million pounds just by dedicating £300 a month to US and UK shares? Mark…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Is £800 enough to start an ISA?

Is it worth bothering with an ISA with less than £1,000 to spare? This writer believes it may be --…

Read more »

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »