![](http://theinvestingbox.com/wp-content/uploads/2023/08/Passive-income-concept-4.jpg)
We’d all like a second income that we don’t have to work for, right? For me, it’s a Stocks and Shares ISA every time. The only work is choosing which stocks to buy, and maybe a quick check on them every now and then.
After that, I just sit back and collect my dividends, which I reinvest.
Filling an ISA
I might split a £20k ISA allowance across five stocks, putting £4k in each. I want long-term income, with diversification to help protect against risk.
I’d have a bank in my starting line-up. They’re out of favour, with inflation, bad debt risk, and all that.
But I could snap up Barclays shares on a price-to-earnings (P/E) ratio of under five. That’s about a third the FTSE 100‘s long-term valuation.
Long-term cash
The forecast dividend yield stands at 5.3%. Not the biggest on the market, but I’d take it. As an alternative, maybe Lloyds Banking Group, on a P/E of six with a 5.9% dividend.
Banks have had a tough time, and there’s not much light ahead just yet. But I’ll take the short-term risk in the hunt for long-term income.
Cyclical buy
I’d want a housebuilder in my second-income portfolio. They face cyclical risk, as we’re seeing painfully in 2023. But isn’t a down cycle the best time to buy?
All the big FTSE builders look good value to me. Taylor Wimpey is on a dividend of 8.2%, with Persimmon on 7.3%, and Barratt Developments offers 7.8%.
Those are forecasts and they might not happen. And where housebuilder shares go in the rest of 2023 is anyone’s guess. But I’d be happy with any of these.
Addictive yields
My next income stock pick is either British American Tobacco or Imperial Brands. We’re looking at dividend yields of 9% and 7.8% respectively here, which could help build my second income.
There’s risk in the survival of the industry. And that’s why I’d probably go for British American. It seems better focused on new technology products.
Final two
So that’s three of the five slots filled. And for the final two there are so many good options it’s hard to choose.
Some insurers look good, like Legal & General on an 8.3% yield, and Aviva at 8%. Those are financials though, and with a bank already in the pot, I could be hurting my diversification.
I like investing firm M&G‘s 10% dividend, though it’s not as well covered. But again, it’s in finance.
Spread the risk
To avoid raising my sector risk, I might add mining giant Glencore, with a mooted 8.1% dividend.
And to finish, pharma firm GSK. It only offers a 4% yield right now, but I expect long-term progressive dividends.
Why do I talk about buying before it’s too late? Well, these all seem to be overlooked and undervalued right now. There’s risk with them all, which investors need to check for themselves.
But if I’m right, they might not stay cheap for long.
The post 5 stocks to buy for a second income before it’s too late? appeared first on The Motley Fool UK.
Our analysis has uncovered an incredible value play!
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
- 4,000 ISA millionaires! Here’s how I’d target a £1.4m Stocks and Shares ISA today
- Quick! 3 incredibly cheap shares investors should consider now
- Here’s how I’d invest my first £1k in high-yield stocks
- Could ITM Power shares keep moving up?
- 7 FTSE 100 superstocks
Alan Oscroft has positions in Aviva Plc, Lloyds Banking Group Plc, and Persimmon Plc. The Motley Fool UK has recommended Barclays Plc, British American Tobacco P.l.c., GSK, Imperial Brands Plc, Lloyds Banking Group Plc, and M&g Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.