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When I first started investing to build wealth, I was taught to look at well-known dividend stocks with a good track record and future prospects.
With that in mind, I think investors at the start of their journey should consider buying National Grid (LSE: NG.) and Howden Joinery Group (LSE: HWDN) shares for juicy returns.
Here’s why!
National Grid
Being the sole owner and operator of the electricity transmission system in the UK gives National Grid great defensive attributes and earnings visibility.
From a defensive view, the business provides a service that is essential, no matter the economic outlook. After all, everyone needs power.
However, it’s worth mentioning that National Grid must maintain the mammoth infrastructure, which can come at a steep price. This could dent payout levels in the future as dividends are never guaranteed. In fact, it did announce a dividend recently for the purpose of future investment. The shares did drop upon the release of this news, but have been heading back upwards.
This defensive ability, as well as monopoly on operations as the only game in town, make National Grid an income seeker’s favourite, in my view. Plus, it possesses a good track record of investor returns. However, I do understand that the past can’t be relied on as an indicator of future performance.
Finally, the fundamentals look great, in my view. Firstly, a dividend yield of over 6% is enticing. For context, the FTSE 100 average is 3.6%. Furthermore, the shares look decent value for money as they trade on a price-to-earnings ratio of just 10.
Howden Joinery Group
A dominant market position for Howden as the UK’s leading kitchen and joinery products supplier starts my investment case off with a bang. It’s one of the reasons I personally own some shares already.
It’s worth mentioning Howden has grown into an industry leader through excellent acquisitions, organic growth, and consistently improving performance. However, the business is not resting on its laurels and continues to look at making the business even more profitable in the future. This is through efficiencies and streamlining operations.
From a bearish view, economic turbulence and inflation especially is a concern. The former can lead to many consumers putting kitchen renovations on the back burner. In turn, this could impact performance and returns for Howden. The latter can lead to higher operational costs, such as raw materials, and could put pressure on margins.
Moving back to the other side of the coin, Howden could be presented with the perfect opportunity to catapult earnings and returns for years to come. This is due to the housing imbalance in the UK, which requires hundreds of thousands of houses to be built in the coming years. Howden’s enviable market position could help here.
Finally, the shares offer a dividend yield of 2.4%, which isn’t the highest. However, I believe consistent returns and bright future prospects are much better than flash in the pan ultra high yields.
