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Two dividend stocks firmly on my radar for when I next have some investable cash are The Renewable Infrastructure Group (LSE: TRIG) and Phoenix Group (LSE: PHNX). Here’s why!
Investing in renewable energy
The Renewables Infrastructure Group is a closed-end investment group with assets in the renewable energy sector. These include wind and solar farms. The aim of the fund is to provide investors with stable, long-term dividends.
Over a 12-month period, the shares are down 16%, from 130p at this time last year, to current levels of 109p.
My bullishness around Renewables shares stems from the fact that renewable energy is now high on the priority list for the world and its climate goals. The move away from traditional fossil fuels is ramping up. In turn, Renewable’s assets could grow in terms of importance, energy output, performance, and investor returns.
Next, with the aim of providing stable returns, a dividend yield of 6.5% is very attractive. However, I’m conscious dividends are never guaranteed. An additional allure for me is that Renewables is actively investing surplus cash into new assets for growth purposes. This could help boost investor returns.
From a bearish perspective, I have two concerns. Firstly, operational issues could hurt energy output, performance and returns. A prime example of this is adverse weather conditions. My other concern is around the expensive maintenance of assets. This could take a bite out of profits and impact returns.
Overall, an attractive level of return and the fact Renewables operates in a burgeoning defensive sector make the shares unmissable for me.
Financial services
Phoenix is one of the biggest life assurance and pension businesses around, and has historically been an excellent dividend payer. Plus, positive performance released today helps my investment case with mentions of excellent new business wins. Obviously, past performance is never a guarantee of the future. However, I reckon this cash cow should continue paying out in the long term.
Over a 12-month period the shares have dropped 20%, from 640p at this time last year, to current levels of 504p. It’s worth mentioning financial services stocks have been some of the worst hit by recent economic turbulence.
As Phoenix’s offering isn’t essential, this is an ongoing risk and the firm can be hurt by cyclical issues. With its operations intrinsically linked to the direction of the general economic landscape, it’s not unusual. For example, a cost-of-living crisis has hurt demand for its product as consumers are busy spending on essentials.
Conversely, as the population continues to grow, and crucially age, in the UK, Phoenix’s enviable market position should help it boost performance and payouts in the future. The business itself reckons it’s on track to record excellent cash reserves, which it will use in part to reward investors.
A dividend yield of 10% makes it one of a few FTSE 100 stocks paying out at that level. Furthermore, the shares look good value for money on a price-to-book ratio of 1.6. This is lower than the average of its peers.
Overall, Phoenix is a prime example of a stock that possesses the cash, brand power, and market presence to continue to reward investors. Short-term volatility could make me nervous, but as a long-term investor, I’d sit back and wait for the payouts!
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