If we’re new to investing, it can be hard to know where to start. So, here are five of my favourite second income ideas.
Nordic American Tankers: 11.9% yield
Nordic American Tankers (NYSE:NAT) offers a market-topping 11.9% dividend yield. Often big dividends like this are a warning sign, but I don’t believe that’s the case here. Its dividend coverage ratio of 1.26 times could be stronger. There isn’t much margin for error, but it’s operating in a booming sector.
The tanker industry is going through something of a supercycle due to supply and demand imbalances. Day rates for the type of tankers Nordic operates — Suezmax — have more than doubled over two years. What’s more, Houthi attacks near the Red Sea and low water levels on the Panama Canal have exacerbated vessel shortages (due to rerouting).
While a calming geopolitical environment may have a negative impact on day rates, the company’s own forecasts seem very conservative. Management suggested day rates could fall in Q1 and Q2. That hasn’t happened.
Phoenix Group: 10.8% yield
Phoenix Group is a FTSE 100 stalwart. It’s an insurer operating in a fairly mature part of the market. It doesn’t offer much in the way of growth, but it does have a 10.8% dividend yield and a coverage ratio of 1.6 times.
Inflation remains a challenge for insurers, and this is one reason insurance stocks have suffered over the past five years. However, it’s still a fairly safe industry, with positive influences in the form of bulk purchase annuities (BPA).
Legal & General: 8.6% yield
Legal & General is the leading player in the UK’s BPA market, and more than £50bn worth of bulk annuity business is estimated to have been written in 2023. It’s a big plus for this often slow-moving sector.
As noted above, inflation remains a challenge for insurers. However, we all need insurance. It’s an industry that isn’t going anywhere. These are stocks I buy and almost forget about — like bonds.
British American Tobacco: 9.7% yield
British American Tobacco is an amazing investment opportunity, but not for me. I’ll invest in mining, oil and gas, defence, but not tobacco. That’s personal. But, of course, there’s a risk that tobacco companies either have to evolve or risk becoming obsolete.
British American is trying to move smokers onto smokeless products. This is probably good for smokers, and probably good for the company. It may be more palatable in the future. Nonetheless, it currently offers a huge dividend yield of 9.7% for those who are happy to invest in the sector.
TBC Group: 7.5% yield
I’m long on Georgian banks, but I’m cautious about buying until after the election. Georgia is a politically polarised country and it’s election year. What’s more a foreign agents bill has engendered widespread protests and clashes with police.
As such, the TBC Group share price is giving up some of its gains. Up 255% over three years, but down 6% today, at the time of writing (2 May). I’d be wary that the stock could lose more value before stabilising.
However, it’s an excellent business, and if the share price falls, the dividend yield will rise. It’s a stock I’m keeping an eye on and I’m bullish over the long run.
The post 5 amazing investments for a megabucks second income! appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
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James Fox has positions in Legal & General Group Plc, Nordic American Tankers Limited, and Phoenix Group Holdings plc. The Motley Fool UK has recommended British American Tobacco P.l.c. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.