Image source: Getty Images
Aiming to generate an additional income stream, the best dividend stocks are firmly on my radar.
Two picks I would love to purchase next time I can are British land (LSE: BLND) and UK Wind Greencoat (LSE: United Kingdom).
Before I delve into my reasoning, let me point out that both stocks are set up as real estate investment trusts (REITs). This simply means that they are real estate companies that make money from their assets. The appeal of this type of stock is that it must return 90% of profits to shareholders, so you can understand why they appeal to me. However, it should be noted at the outset that dividends are never guaranteed.
Please note that tax treatment depends on each client's individual circumstances and may be subject to change in the future. The content of this article is provided for informational purposes only. It is not intended to be, nor does it constitute, any type of tax advice.
British land
One of the largest and oldest REITs in existence, the diversification of properties owned by British Land is a tantalizing prospect. These include residential, commercial and corporate properties. A diversified set of properties is attractive as not all eggs are in the same basket. Weakness in one area could be offset by strength in another.
The shares are up 26% in a 12-month period from 343p this time last year to current levels of 434p. I believe this could be a sign that the housing market is showing signs of recovery.
From a profitability standpoint, it's hard to ignore a 5.8% dividend yield. Additionally, the company has a good track record of rewarding shareholders and is an established company with a healthy balance sheet.
The biggest concern I have at the moment when it comes to British Land is the fact that continued economic pressures could affect rent collection. Because higher interest rates can mean higher rents, the risk of default increases. If performance falls, profitability levels could also be affected.
Overall, I think British Land is a solid income stock that will help drive wealth through regular and consistent dividends.
UK Wind Greencoat
Renewable energy is like the artificial intelligence of the energy world, in my opinion! It is the hot topic and I think it is here to stay for the long term.
Greencoat invests in onshore and offshore wind farms and can count on major energy suppliers ESS and Central as clients.
The shares are down 6% over a 12-month period, having been trading at 149p at this time last year, compared to current levels of 139p.
From a bearish perspective, it is worth noting that growth is not necessarily easy for Greencoat. This is because land regulations for building wind farms are very strict. Additionally, higher interest rates mean higher borrowing costs to finance growth. Both issues could harm performance and potentially investors' profitability.
Speaking of profitability, a dividend yield of 7.5% is tempting. Additionally, the company has been paying dividends consistently for over 10 years. However, I understand that past performance is no guarantee of the future.
I believe Greencoat could generate great income now and in the future. This is related to the growing sentiment away from traditional fossil fuels led by global governments.
