Dividend stocks are a great way for me to generate passive income. I also have the option of reinvesting my dividends to buy more shares, which should mean I get an even bigger passive income next year.
What’s most important, though, is buying shares that pay out dependable dividends. This is because dividends are never guaranteed. Companies have to remain profitable before they consider paying dividends to shareholders like myself.
With this in mind, here are two companies I’m considering for my income portfolio that have paid consistent dividends over the years.
A dividend stock to count on
The first company is BAE Systems (LSE: BA), a provider of military equipment and security systems for governments across the world. The UK’s Ministry of Defence and the US Department of Defense are both major customers of BAE Systems. Revenue can typically be quite stable as these governments have to maintain and upgrade their security capabilities each year.
City analysts are expecting the dividend yield to be 4.5% in 2022. This isn’t huge like some other FTSE 100 stocks. But I still view this as a respectable dividend for my portfolio.
However, it’s the consistency of dividends here that I’m drawn to. In fact, BAE Systems has paid a dividend every year going back to at least 1992. This covers the dotcom bubble, the financial crisis, and most recently the pandemic. This is an impressive run of dividend payments.
Another dividend stock
The next company is Rathbone Brothers (LSE: RAT), an investment and wealth management business.
Jumping straight to the dividend forecast and this is a decent 4.1% for next year. Again, it’s not huge like some UK stocks, but I still consider this high enough for my income portfolio.
Rathbones Brothers has been able to pay a regular dividend over the years too. In a similar way to BAE, the company has paid one every year since at least 1992. This track record means there’s a good chance it’ll pay a dividend again in 2022.
Risks to consider
It’s important that I review a company’s history of dividend payments before I invest. However, this doesn’t guarantee that a dividend will be paid in the future. If either BAE Systems or Rathbones Brothers struggles in the year ahead and profitability falls, there’s a good chance the dividend will be cut, or worse, stopped altogether.
Rathbones Brothers generates fees on its assets under management, so a stock market crash could really impact the company’s profits. If this does happen, I expect the dividend to be reduced.
As for BAE Systems, it has to keep developing its technologies to keep up with global demand for security. There’s always a risk of losing a key government contract to a competitor, which would significantly impact its profits.
On balance though, I’m looking to buy these dividend stocks for my portfolio.