There are several alluring features to the income-focused investing approach. One of the best aspects of the plan is perhaps how easy it is to monitor its progress. As an income investor, you can assess where you stand in the quest for financial independence by comparing your dividend income to your expenses.
Increase your portfolio’s starting passive income
In an article from The Motley Fool stated that a $500 increase in annual dividend income can be a welcome step toward achieving financial independence, whether you’re just beginning started or an experienced investor. You could increase your portfolio’s starting passive income by about $500 if you invested $3,000 in each of these two equities.
- British American Tobacco is preparing for a world without combustible materials.
British American Tobacco (BTI 0.28%), which sells tobacco products globally, is a market leader in its sector. The corporation has a $72 billion market valuation thanks to a portfolio that includes products including Camel and Newport cigarettes, Glo heated tobacco, Vuse vapor, and Velo nicotine pouches. For comparison, only Philip Morris International and Altria Group outperform this market value.
British American Tobacco has spent the last ten years expanding its portfolio of noncombustible brand names in response to the enormous market demand for goods that are perceived as less dangerous than cigarettes. As of June 30, the number of noncombustible users for the corporation had just surpassed 24 million, an increase of 1.5 million from the same time last year. The company believes that its new category will become profitable in 2024 as a result of the healthy growth rate of its user base.
British American Tobacco is working to increase the markets for its products and further enhance the ones it already offers. Because of this, the company’s noncombustible revenue share as a percentage of overall sales should increase significantly over the next few years from its 16.6% rate as of the first half. Over the following five years, earnings growth of 3.6% per year is anticipated as a result.
British American Tobacco offers income investors an 8.9% dividend yield, which is significantly higher than the 1.6% yield of the S&P 500 index. Additionally, the distribution is readily supported by profits because the dividend payout ratio is expected to be about 55% for the next 12 months. A bargain when compared to the forward P/E ratio of 11.8 for the tobacco industry, investors may purchase shares of British American Tobacco at a forward price-to-earnings (P/E) ratio of 6.5. At the current share price of $32, a $3,000 investment would buy 95 shares of the stock, bringing in a starting dividend income of $266 per year.
Increase your portfolio’s starting passive income by this
- Medifast: Services for weight loss are beneficial to the company’s finances
The Motley Fool reported that the health effects of obesity among Americans are a problem in the United States, as they are in the majority of economically developed nations. Amazingly, 73.1% of adults in the United States are overweight or obese. It will take every instrument at our disposal to address a problem of this magnitude. This includes diet tablets from brands like Eli Lilly and coaching services from Medifast (MED -0.60%), a company that specializes in weight loss and nutrition.
Over the course of its existence, Medifast has assisted in the transformation of 3 million lives through its weight loss strategy that centers on replacing unhealthy eating habits and sedentary lifestyles with active and nutritious ones. The company undoubtedly has lots of room for expansion given that its entire addressable market is in the hundreds of millions in the U.S. alone.
Nasdaq also reported that the payout ratio for Medifast’s 7.8% dividend, which is expected to be close to 87% for the next 12 months, is less readily covered than that of British American Tobacco. The good news is that future performance of the company will already be impacted by a tightening environment. Furthermore, the company’s dividend is possibly stronger than it appears to be given that it has no debt obligations as of June 30 on its financial sheet.
The forward P/E ratio for Medifast, which is 11.1, is around half that of the personal services sector as a whole, which is 21.2. At the current share price of $85 for 35 shares, an investment of $3,000 would result in an initial annual dividend income of $233.