Investing in income stocks can be a great way for me to derive an income stream simply from holding shares in a company. As such, I’ve found two companies to buy with a spare £1,000. Why do I find these firms so attractive? Let’s take a closer look.
Mining for dividends
Anglo American (LSE:AAL) shares are down 22% over the last three months and, at the time of writing, they’re trading at 2,691p.
In 2021, the mining giant paid a total dividend of $4.19. That currently equates to a dividend yield of 7.33%, although it’s worth noting that dividend policies could change at some point in the future.
However, for the six months to 30 June, the business reported a 17% fall in revenue and a 29% decline in profit, year on year. This led the company to cut its interim dividend by 27%, to $1.24.
This may seem disappointing to shareholders, but the results require some explanation. Much of the negative news was down to a couple of hopefully-short-term issues. Namely, the war in Ukraine, which has tightened commodity markets, and supply chain problems that have arisen after the pandemic.
There remains, however, long-term demand for many of the materials that Anglo American produces. Copper, for instance, is critical for use in electric vehicles and silver is an essential component in solar panels.
Furthermore, the business has operating cash flow of $13.18bn, suggesting that it’s in a financially healthy state.
Income at lightning speeds?
The BT (LSE:BT.A) share price has fallen 14% in the past month, and is currently trading at 147p.
For the year ended March 2022, the firm paid a total dividend of 7.7p. At the time of writing, that equates to a dividend yield of 5.08%. While this isn’t as high as Anglo American, it’s still attractive.
The telecommunications business reported mixed results for the three months to 30 June. While revenue grew 1% to £5.1bn, profit decreased by 10%. Much of the latter result can be attributed to cost inflation, which is beginning to shrink profit margins.
Despite this, the company still expects full-year free cash flow to sit between £1.3bn and £1.5bn.
Additionally, there remains high demand for the 5G network that BT has been rolling out. This could have a positive impact on future balance sheets.
Last week, it was also reported that the UK government is dropping its investigation into the actions of French billionaire Patrick Drahi. He increased his stake by around 50% in December and now owns around 18% of BT shares.
There has been speculation that he’s attempting a slow-motion takeover, which could lead to a rise in the share price if true.
Overall, these two businesses have attractive yields and, given their long-term potential, I’ll use my spare £1,000 to add both to my portfolio soon.