One well-trodden path in the world of stock market investing is to harvest dividend income. You can use the dividend money as a second income or reinvest back into your shares to help compound your money, perhaps to build up a savings pot for retirement.
Many investors go for FTSE 100-listed shares because they tend to be more stable and are underpinned by large, well-established enterprises. There are many to choose from in the leading London index, but I like the look of these two, which pay a decent-sized dividend with the potential for the payment to grow over time.
When building a portfolio of shares to buy and hold for the long term, I reckon it’s a good idea to diversify your holdings across different sectors. These two firms operate in different sectors and could help you to build up a well-balanced portfolio.
Retail
Well-known clothing, footwear, accessories and home products retailer Next (LSE: NXT) has a 500-plus store estate in the UK and Ireland, as well as a giant online shopping operation. On top of that, international websites serve around 70 countries and the firm also has 200 or so mainly franchised stores abroad.
The retail sector has been in some upheaval with sales migrating online and many bricks-&-mortar retail chains struggling, but Next’s earnings and cash flow have held up well over the past five years. The dividend has been rising too, and City analysts following the firm expect modest increases in the payout over the next couple of trading years.
With the share price close to 5,472p, the forward-looking dividend yield for the current trading year to January 2020 is just over 3%. The company issued a moderately optimistic outlook statement in May with the directors expecting online sales to grow and shop sales to decline a little. Meanwhile, the firm has been busy buying back its own shares, which should help keep earnings, and dividend-per-share figures, rising.
Property development
Berkley Group Holdings (LSE: BKG) develops and builds residential and mixed-use property mainly in London, Birmingham and the South East. Along with other homebuilding companies, trading has been good over the past few years with decent rises in revenue and cash flow.
The main attraction for me today is the chunky dividend. With the share price close to 3,583p, the forward-looking yield for the current trading year to April 2020 is knocking on the door of 6%. That strikes me as decent income if the firm can maintain the payment going forward.
Early in June, Berkley said in its outlook statement that the operating environment has been uncertain for three years because of Brexit, but robust demand continues to underpin its market. The outlook remains positive although the firm intends to be cautious with investment in the current economic environment because its markets are cyclical.