Stock market

9.4% yield! A fantastic dividend stock that I would buy to target a lifetime of second income.

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I believe that investing in UK shares is the best way to generate second income. As we have seen, a diversified portfolio of stable, financially strong FTSE 100 And FTSE 250 Stocks can generate a lifetime of abundant passive income.

At the moment, I’m looking for dividend stocks to help me grow my stocks and shares ISA. The profits I get are reinvested into more shares, giving me even more profits to reinvest. And so the cycle goes which over time allows me to significantly increase the size of my portfolio.

Once I retire, I’ll be looking for a passive income to help fund my day-to-day expenses and pay for some (hopefully regular!) luxury treats. Given the growing uncertainty over the state pension, targeting other income from dividend stocks seems a shrewd move.

The next step

The London stock market is full of companies with long and distinguished dividend records. Some offer very profitable yields this year and beyond. So which should I choose?

This is one on my watch list today.

Going green.

Investing in renewable energy reserves can be an effective way to generate long-term income. Demand for green power is increasing as measures are taken to address the climate emergency.

Renewables generated a record 30 percent of the world’s electricity last year, according to energy think tank Amber. Growth from solar sources was particularly high. They calculate more than twice as much new electricity as coal in 2023.

FORESIGHT SOLAR FUND LIMITED (LSE:FSFL) is one of the UK shares I would buy to take advantage of this trend. The green energy giant is the largest solar investment company by installed capacity on the London Stock Market, with solar assets spread across the UK, Spain and Australia.

The fund’s share price has fallen sharply since late 2022, reflecting the Bank of England’s interest rate hike. But it is back in recovery mode as inflation eases and speculation of a rate cut grows.

9.4% profitable yield

Foresight has grown annualized profits by more than 33% since its IPO a decade ago. And it has announced plans to raise it again in 2024, to 8p per share from 7.55p last time.

City analysts expect the business to deliver on that promise. But that’s not all, as they expect profits to grow over the forecast period up to 2026, as shown below:

The year Dividend per share Dividend yield
2024 8 p 8.9%
2025 8.2 p 9.1%
2026 8.41 p 9.4%

This means that the short-term dividend yield is above 9%.

Investing in renewable energy stocks has another major benefit for investors. Electricity demand remains stable at all points in the economic cycle. So unlike fossil fuel specialists, earnings don’t suffer during downturns.

This in turn gives the foresight choice the power to pay strong dividends throughout the year. The fund’s long track record of dividend growth is the best proof of this.

Solar panels are expensive to put up and run. And the risk of large and unexpected costs is increasing as extreme weather events become more frequent.

But that doesn’t put me off. I expect foresight to continue to pay big and growing dividends in the future.


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