If you are investing for your pension, to build future riches or just to put together a tidy nest egg, then you should seriously consider dividend investing.
The art of income investing is that you choose strong, consistentbusinesses thatgenerate a steady stream of profits. Well-run companies will produce dividends thatare well covered by these profits.And if they are growing these profits, you are also likely togain from a rising share price too.
So here are my three picks for income shares that you should buy right now.
General Electric started out in 1892 making industrial dynamos and electric motors. Today it buildsjet engines and sells financial services. BT (LSE: BT-A) started out making telephones. It is clear today that it wants to be more than a phone company.
Thats whythisfirm is increasingly turning its attentiontoIT services, broadband and pay-tv. This move away fromits traditional businesswas signalled by the launch of BTs television services, as well as its proposed 12 billion purchase of EE. This will make it far and away the leading supplier of both broadband and fixed line telecoms in the UK.
It will then leverage the cash generated from these operations to storm the fortress encompassed by a deep moat that is Sky. It isa boldstrategy, though arguably it is also quitea gamble. I think BT can just about pull it off, which why I rate this company a buy. Consensus forecasts a 2016 P/E ratio of 13.78 and a dividend yield 3.20%.
While many people would question whether BT can make pay-tv a success, I think that others would say the same about Barclays (LSE: BARC) and its investment banking arm. Differences of opinion on this subject may have been one of the reasons for Anthony Jenkins departure from the company.
I think getting the investment bank back to profitability should be at the centre of the new chief executive Jes Staleys strategy. What has traditionally been a US-centric business must shift its focus to the East. That, accompanied by ahighly profitablecredit card business and a retail bank that is returning to full health, should be enough to push Barclays share price and its dividend yield higher.
The company looks good value, with apredicted 2016 P/E ratio of 11.47, and a dividend yield of 2.53%.
International Consolidated Airlines Group
One of the most dramatic moves in markets over the past year has been the fall in the oil price. I believe that this is not a short-term blip, but a long-term trend in all commodity prices. And I think that the airlines stand to benefit.
IAG (LSE: IAG) owns the British Airways and Iberia brands, and although the share price has already risen substantially, I think it can push further ahead.Income is set to surge ahead as the low oil price has finally made air travel a profitable business once again.
The fundamentals show that this firm is still cheap, with a predicted P/E ratio of 11.08, falling to 8.48, and a dividend yield of 2.39% rising to 3.13%. This is a clear buy to me.
Income investing is at the heart of many privateinvestors’ strategies. Buying into growing, reliable companies such as BT, Barclays and IAG can make all the difference to your pension pot.
If you want to learn more about this key money-making technique, simply click on this link to read “How to create dividends for life”, and it will be dispatched to you, free of charge and without obligation.
Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.