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In my opinion, income stocks that offer secure and consistent payouts are a great way to generate a second income. However, it should be noted that dividends are never guaranteed.
Two options that I think investors should consider examining more closely are Vodafone (LSE: VOD) and ITV (LSE: ITV). This is why!
Telecommunications
Vodafone is one of the largest telecommunications companies in the world. It's fair to say the stock has struggled in recent years. However, in my opinion, there is still a lot of meat on the bones that makes it worth it.
Over a 12-month period, the shares have fallen 26%, from 98p this time last year to current levels of 66p.
Poor performance and management in recent years have not helped the share price or investor confidence. The consequences of this have been a drop in yields and, more importantly for investors, a rise in debt levels. The latter is the main risk for any passive income stock. Rising interest rates make it more expensive to repay debt and this could hurt profitability. Additionally, paying down debt could take priority over rewarding investors and growth initiatives.
Moving on, a third quarter update yesterday looked like a mixed bag. For example, revenue fell from €11.64 billion to €11.37 billion, a drop of 2.3%. However, drilling down into individual business areas showed some positivity. Turkey, the United Kingdom, Germany and its high-growth territory in Africa seem to be showing promising signs, especially the last one. This key market could present lucrative growth opportunities in the coming years.
In addition to this, a recent 10-year agreement with microsoft Helping bring ai to your customer base could prove lucrative in the long run. Additionally, new CEO Margherita Della Valle, appointed last year, could inject new ideas to steady the ship toward a better course for the future.
Although the short term may be challenging, the future prospects are promising for me. With a price-to-earnings ratio of just two and a dividend yield of 11.3%, the stock is hard to ignore.
Television
ITV shares have been hit in recent years by the changing landscape of how we consume content. On top of this, a major drop in advertising revenue hasn't helped.
Over a 12-month period, they are down 31% from 85p this time last year, to current levels of 58p.
Continued macroeconomic volatility hurting advertising spending is a significant risk to ITV's future prospects. Furthermore, the streaming giants Netflix, Amazon, Apple, and others, continue to produce quality content for consumers. ITV's declining market share is also a cause for concern. Both could harm performance and profitability.
On the contrary, ITV has been adapting to the times. Its revamped streaming offering, ITVX, is now in line with others in the industry. Plus, it still has a lot of clout with its in-house production arm. He continues to produce hits including I'm a celebrity… and love island. Both shows have immense popularity and a large number of viewers.
Like Vodafone, short-term volatility abounds, but the future looks bright. ITV shares trade with a P/E ratio of just eight and offer a dividend yield of 8.5%. In my opinion, this alone makes them worth careful consideration by investors.
