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I think a second source of income is a very realistic possibility by purchasing dividend-paying stocks. However, it's worth remembering that dividends are never guaranteed. With this in mind, I look for quality stocks with the safest possible level of profitability.
For example, if you had £2,000 to invest right now, you could buy 119 shares of National Network (LSE: NG.) and Unilever (LSE: ULVR).
a breakdown
National Grid is the owner and operator of gas and electricity transmission in the United Kingdom. It has no competitors, which is an added advantage.
Unilever is one of the world's largest consumer goods companies with vast reach and immense brand power.
With £1,000 you could buy 94 National Grid shares at £10.54 per share. With the other thousand pounds, you could buy 25 Unilever shares for £39.21 each.
As the chart below shows, both stocks have been affected by macroeconomic volatility. However, this turmoil has made stocks cheaper and more attractive to me.
Bullish traits and risks to watch
For me, the dividend yield on offer, as well as the current valuation of both stocks, are attractive. The table below breaks down how both stocks appear to be good value for money using the price-to-earnings stock valuation method.
| Company | Dividend yield | P/E Ratio |
| National Network | 5.48% | 5 |
| Unilever | 4% | sixteen |
From a bullish perspective, National Grid's lack of competitors means that income and investor profitability often remain fairly stable. This is attractive to me as a dividend seeker. In addition to this, energy is a necessity for everyone, offering the race great defensive capabilities.
On the other side of the coin, maintaining an expensive piece of key infrastructure can be costly. This could affect payment levels. Additionally, there is the looming specter that the government could intervene and try to limit the profitability levels of its investors.
If we take a closer look at Unilever, the power and profile of its brand is enviable. Covers household goods, food and more around the world. A recent strategic review could catapult performance and returns to new heights. The company is looking to divest lower-performing brands and invest more in better-performing brands.
On the contrary, as the recent cost of living crisis has shown, consumers are looking to stretch their budgets even further. The lure of cheaper, unbranded commodities could hurt Unilever's performance. Additionally, rising costs and shipping issues could also affect you. I'll keep an eye out for updates on this front.
Reinvest dividends
It is worth mentioning that if I want to strengthen my second source of income, I could reinvest my dividends received in more shares of these stocks, or also in other stocks that pay dividends. Additionally, I could try investing regularly, a fixed amount per month, for example, in such stocks to help accelerate my goals.
Right now I don't have two grand ones lying around. However, the example above shows how it is entirely possible to buy quality dividend stocks, with a good valuation, with defensive and attractive characteristics to achieve passive income.
