Income stocks provide investors with regular, albeit not guaranteed, dividends. This can be a less risky strategy than investing in stocks for growth.
That’s largely because dividend-paying stocks tend to be profit making — hence why they’re sharing this profit with shareholders — and established firms.
These companies are well represented in my portfolio. And that’s also because I have a compound returns strategy — I reinvest my dividends year after year and earn interest on my interest.
Should you invest £1,000 in Nextenergy Solar Fund Limited right now?
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But today, I want to look at two forgotten dividend stocks. Let’s find out what they are.
Steppe Cement
Steppe Cement (LSE:STCM) is a Kazakh cement manufacturer, which some investors may know for its sizeable dividend. The stock currently offers an 11.5% dividend yield, but this is after a bull run. The yield was above 15% around six months ago when the share price was considerably lower.
There are several positive signs for Steppe. For one, it entered 2023 by posting recorded revenue growth in 2022, citing positive market conditions as it focused on the Kazakh domestic market.
Naturally, this cement company’s performance is heavily linked to the strength of the domestic economy, as cement demand is dependent on building activity. And in 2023, the Kazakh economy is expected to see stronger growth than most countries worldwide — somewhere between 3.5-4%.
Moreover, Kazakhstan’s construction industry is expected to register a growth of 3.4% in real terms in 2023. The government has identified construction as one of the major industries to drive the growth of Kazakh economy in the coming years.
However, investors will naturally be wary of a small-cap Kazakh cement company. This concern weighs on the share price — it trades with price-to-earnings of just 6.7 — and pushes the yield upwards.
It’s certainly an interesting prospect, and one I’m considering very carefully. I’m a little concerned about investing in a firm that’s up 73% in over 12 months. So I’m not buying yet.
NextEnergy Solar Fund
NextEnergy Solar Fund (LSE:NESF) is a UK-focused solar energy fund. The Saville Row-based company, which owns assets generating around 865MW of energy as of the December 2022, calls itself a solar+ fund. It invests in solar assets, alongside complementary ancillary technologies, like energy storage.
Firstly, it’s worth noting that NextEnergy Solar Fund is a a real estate investment trust (REIT). This means it must pay out 90% or more of its taxable profits to shareholders in the form of dividends. As such, the stock currently offers a 6.7% dividend yield. I appreciate that’s some way behind Steppe, but it’s still far above the index average.
With regards to concerns, the trust is focused on UK solar assets, which could leave it vulnerable to weather systems, taxation changes and new regulation. However, it is worth noting that solar panels are effective, even in overcast conditions. In fact, rain even helps clean dust from the panels.
I see NextEnergy solar as a very attractive investment, and it currently trades with a 12% discount versus its net asset value. I recently added this stock to my portfolio.
