Image source: Getty Images
When it comes to dividend stocks, some of the most reliable companies to focus on are from the infrastructure sector. However, for some stocks in this area, it is not just the record that can impress investors. Instead, the high yield is remarkable. Here are two to consider.
Healthy dividend cover
The first is Octopus Renewables Infrastructure Trust (LSE:ORIT). The trust invests in a variety of renewable energy projects, including wind and solar plants. It also has exposure to energy storage systems.
Make money from the infrastructure it invests in, such as selling energy to consumers. This creates positive cash flow, which can be used to pay dividends to investors.
Over the past year, the share price has fallen by 24%. Part of the reason for this “challenging macroeconomic conditions”which was scored by the management team in the half-yearly report. This includes interest rates that remain high for a long time, making new debt more expensive to finance Octopus projects.
However, the dividend cover is at a healthy 1.33, which means that current earnings per share easily cover dividend payments. In addition, there are exciting new initiatives coming soon, including a new power purchase agreement with Sky UK starting in April. This should help increase revenue next year.
paid a dividend of 8.76 %. Despite the risk that interest rates will remain high in 2025, it is clear that the company has managed to cope with this in 2024.
Exposure to various infrastructures
The second company that investors should consider HICL Infrastructure (LSE:HICL). The stock provides investors with exposure to a diversified portfolio of key public and private infrastructure assets. This includes hospitals, schools, and transportation networks.
It makes money by having long-term contracts with government agencies, local authorities or private operators. The proceeds from these contracts provide the cash flow that must be paid to shareholders. In this case, the current dividend yield is less than 7%.
It is true that the share price has fallen by 14% in the past year. This is one of the factors that increased the yield. The decline can be explained in part by the decline in the ratio of assets in the portfolio. Since the share price should closely track the value of the portfolio’s total assets, this makes sense. This remains a short-term risk for investors this year.
Investors may find this infrastructure stock attractive not only because of its high yield but also because of its diversified portfolio. It has exposure to a wide variety of projects, and different clients. This should be protected from a black swan event somewhere.
Overall, both income stocks could be attractive for equity investors to consider going forward.
Source link
