Income stocks that pay regular dividends are a great way to build a second income stream. Although dividends are never guaranteed, I reckon some stocks are defensive, which means their revenues and payouts are more likely to remain stable, no matter the economic outlook.
Two stocks I think investors should consider snapping up are BBGI Global Infrastructure (LSE: BBGI) and Greencoat UK Wind (LSE: UKW). Here’s why!
Investing in key infrastructure
BBGI is set up as an investment trust and invests in infrastructure projects across the UK, Europe, North America, and Australia. Typical projects include motorways, schools, fire stations, toll roads, and more. The income it makes from investing in these is then distributed to investors as dividends.
The defensive ability for BBGI is linked to two things, in my opinion. Firstly, these types of projects are essential. For example, roads and schools and other public services are essential no matter the economic outlook. This leads me nicely on to the second point. BBGI’s partnerships are usually with governmental bodies. This is positive as it means a long-term contract as well as stable revenues as it partners with organisations pivotal to the running of day-to-day core services.
Looking at returns, BBGI’s forward dividend yield of 6% is attractive. Plus, it has a healthy balance sheet which always helps provide a safety blanket.
From a bearish perspective, continued economic issues could hurt BBGI and its share price as well as asset values. In addition to this, if geopolitical tensions continue, this could hurt interest rate and inflation figures just as they start to come down causing the firm issues with its share price, and investor sentiment.
Overall, BBGI shares look like they could be great to boost passive income. An above-average yield, as well as defensive traits and a wide footprint make it an exciting prospect, in my opinion.
As the world looks for energy alternatives away from fossil fuels, wind energy output is ramping up. Greencoat owns a number of onshore and offshore wind farms. It sells the electricity to larger energy companies, including SSE and Centrica, to mention a couple.
The beauty of Greencoat is that it is set up as a real estate investment trust (REIT) meaning it must return 90% of profits to investors.
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With that in mind, Greencoat’s investment case looks solid to me. Energy is a basic requirement for all, no matter what’s going on in the world. Plus, the push from world governments to move away from fossil fuels will help firms like Greencoat grow.
At present, the shares look good value for money on a price-to-earnings ratio of seven. Plus, a dividend yield of 6% is enticing too.
Looking at risks, planning regulations are strict when it comes to new wind farm locations. This could hinder Greencoat’s growth aspirations. Plus, the business borrows money to fund new locations. In the current high interest environment we find ourselves in, it could be trickier and costlier to fund growth.
Overall, Greencoat is one of a number of renewable energy stocks I reckon will soar in the longer-term as well as provide solid investor returns too.
The post 2 defensive income stocks investors should consider buying for bumper returns! appeared first on The Motley Fool UK.
Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat Uk Wind Plc. 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.
Motley Fool UK 2024