Regular dividends from quality FTSE income stocks can help boost wealth, and even create an additional income in some cases.
Two stocks investors should consider buying are Rio Tinto (LSE: RIO) and Shell (LSE: SHEL).
Here’s why!
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Mining giant
Rio Tinto is one of the world’s biggest mining businesses. As commodity stocks are linked to the global economy, it won’t come as a surprise to see the Rio share price meandered up and down during the past 12-months.
The shares are down 5% over a 12-month period from 5,232p at this time last year, to current levels of 4,926p.
Ongoing economic and geopolitical volatility are risks that have held the shares back. For example, a stalling Chinese economy has hurt demand for metals, sales, and performance levels.
Other issues elsewhere, including rampant inflation and higher interest rates in the US, have meant performance has been dented too. I’ll keep an eye on this. However, this cyclical nature is something to bear in mind with all mining stocks.
The biggest mining firms in the world are at the mercy of the cyclical nature of mining. However, they’re also much better equipped to deal with it, and still offer shareholder value.
For example, Rio shares look very attractive on a forward price-to-earnings ratio of just eight. If volatility cools, the shares could head upwards, so now could be a good time to act.
Moving on, a forecast dividend yield of just under 7.5% for 2024 is extremely enticing, and blows the FTSE 100 average of 3.8% out of the water. However, dividends are never guaranteed.
For me, Rio is an example of a business that will flourish further when the economic picture is better. Plus, it’s still well-equipped to deal with current turbulence. Its wide presence, track record, cash rich balance sheet, and future prospects are bright, if you ask me.
Oil giant
Similar to Rio’s dominant market position, Shell is one of the largest oil firms on the planet.
The shares are up 18% over a 12-month period from 2,232p at this time last year, to current levels of 2,648p.
I reckon this rise is in part due to increased demand due to an increase in energy values. However, another similarity to Rio is the fact that Shell is also averse to cyclical issues. The fate of the firm is also linked to the global economic outlook. This can hurt performance and returns. However, a bigger risk I’m worried about in the longer term is the transition away from fossil fuels, and towards greener alternatives.
From a bullish view, the shares offer a yield of 4.5%, and it looks well covered.
Furthermore, the business does have its own green strategy to capitalise on the green revolution in the years ahead. However, it has recently scaled back its ambitions which is something I’ll keep an eye on.
The use of traditional fossil fuels and demand levels won’t disappear overnight. Plus, the transition to renewable energy could take decades to complete. There’s plenty of time for Shell to reward investors, and help build long-term wealth, if you ask me.
