When I look for dividend shares, I want to buy those where I can be confident that income payments are going to continue in the future. Of course, I can’t guarantee this 100%. But I can consider the track record of a business to give myself enough confidence that I’m not making a stupid decision. With that in mind, here are two ideas that I’m thinking about adding to my portfolio.
Green is good
The first one is Greencoat UK Wind (LSE:UKW). The investment trust went public in 2013 and started paying out income from the start. It typically pays a dividend each quarter, with the current yield at 7.69%.
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The business is focused around investing in renewable energy assets (hence the reference to wind in the name). It makes money in several ways, including selling the energy generated by the offshore wind farms. The trust is also involved with the UK government in different projects and subsidies that provide income.
Given the steady nature of operations, the historical income payments have been not only consistent, but growing. The dividend cover is 1.5 times earnings, meaning that it can be comfortably paid without putting pressure on the finances.
The stock is down 2% over the past year. One risk of investing is that the net asset value (NAV) of the portfolio isn’t really increasing. Given that the NAV should reflect the share price, the stagnation isn’t great.
Slow and steady isn’t a bad thing
A second idea that has been paying out reliable income is the Lowland Investment Company (LSE:LWI). The trust, run by Janus Henderson investment management, primarily buys UK stocks. It targets all sizes, from small-cap through to large FTSE 100 names.
The aim is both income and growth. The stock is up 12% over the past year, so clearly it gets a tick in that box. But from a dividend perspective, it’s also doing well. The current yield is 4.73%, well above the FTSE 100 and FTSE 250 averages. It has constantly paid out a dividend for over a decade and now pays out cash each quarter.
Some will say that investing in mostly UK stocks limits the potential for the fund to grow. Further, it could give me a concentration risk by simply adding more UK stocks to my existing UK portfolio. However, Lowland has around 120 holdings at any one time. So buying the stock gives me an easy way to access a lot of different companies, which actually helps to diversify my risk.
Given the spread of sectors and firms, I see the future income stream as safe. If a couple of the 120 stocks stop paying dividends, it’s not going to materially impact my yield.
I like both ideas and am thinking about adding them to my portfolio.
