Image source: Getty Images
Income stocks offering safe and consistent payouts are a great way to build a second income, in my eyes. However, it’s worth noting that dividends are never guaranteed.
Two picks I think investors should consider taking a closer look at are Vodafone (LSE: VOD) and ITV (LSE: ITV). Here’s why!
Telecommunications
Vodafone is one of the biggest telecommunications businesses in the world. It’s fair to say the stock has struggled in recent years. However, there’s still plenty of meat on the bones that make it worthwhile, in my opinion.
Over a 12-month period, the shares have dropped 26%, from 98p at this time last year to current levels of 66p.
Subpar performance and management over the past few years haven’t helped the share price, or investor confidence. Consequences of this have been declining performance, and more importantly for investors, rising debt levels. The latter is the main risk to any passive income stock. Rising interest rates make the debt costlier to pay down and this could hurt returns. Plus, paying down debt could take precedence over rewarding investors and growth initiatives.
Moving on, a Q3 update yesterday looked like a mixed bag. For example, revenue dropped from €11.64bn to €11.37bn, a decline of 2.3%. However, diving into individual business areas showed some positivity. Turkey, UK, Germany, and its high-growth territory of Africa, all seem to be showing promising signs, especially the last one. This key market could present lucrative growth opportunities for years to come.
In addition to this, a recent 10-year deal with Microsoft to help bring AI to its customer base could be lucrative in the longer term. Furthermore, new-ish CEO Margherita Della Valle, appointed last year, could inject fresh ideas to steady the ship towards a better course for the future.
Although the short term may be challenging, the future outlook is promising for me. On a price-to-earnings ratio of just two, and a dividend yield of 11.3%, the shares are hard to ignore.
Television
ITV shares have been hurt in recent years by the changing landscape of how we consume content. In addition to this, a major drop off in advertising revenue hasn’t helped.
Over a 12-month period, they’re down 31% from 85p at this time last year, to current levels of 58p.
Continued macroeconomic volatility hurting advertising spending is a major risk to ITV’s future prospects. Plus, streaming giants Netflix, Amazon, Apple, and others, continue to churn out quality content for consumers. Dwindling market share for ITV is a worry too. Both could hurt performance and returns.
Conversely, ITV has been moving with the times. Its revamped streaming offering, ITVX, is now in line with others in the industry. Plus, it still holds a major pull with its in-house production arm. It continues to churn out hits including I’m a Celebrity… and Love Island. Both shows have immense popularity and huge viewership numbers.
Similarly to Vodafone, short-term volatility is rife, but the future looks bright. ITV shares trade on a P/E ratio of just eight, and offers a dividend yield of 8.5%. This alone makes them worth investors considering closely, in my eyes.
Credit: Source link
