Earning a second income through dividend shares is one of the most rewarding experiences for me. Being a part-owner of these companies means earning a share of their profits in cash, which is always satisfying. With a plethora of options available, choosing the right dividend shares may seem daunting. However, by focusing on specific criteria, the selection process becomes more manageable.
Filtering Dividend Shares
- Start by considering FTSE 100 shares, which are the largest companies listed in the UK. These companies are usually well-established and have a solid track record, reducing potential risks associated with smaller businesses.
- Next, focus on a dividend yield between 2% and 9%. A yield less than 2% may be too low, while a yield above 9% might not be sustainable in the long run.
- Check for dividend cover, making sure it is greater than 1.5. It is important to ensure that the company has enough earnings to cover dividend payouts.
- Look for companies with a dividend history of at least five years. This indicates reliability and stability in payouts over time.
By applying these criteria, the selection of dividend shares narrows down considerably, making the decision-making process easier and more informed.
Consideration of a Best-in-Class Dividend Share
Today, I am considering Shell (LSE:SHEL), an energy giant that meets the criteria of being one of the best dividend shares. With a market capitalisation of £175bn, Shell is one of the largest FTSE 100 companies, offering a dividend yield of 4%, with a cover of three times and a long history of dividends.
While dividend yield is important, sustainable profits are also crucial. Shell’s commitment to investing in low-carbon solutions and its LNG operations indicate a forward-thinking approach amidst the energy transition. Recent strong earnings and a new share buyback programme further illustrate Shell’s commitment to shareholder returns.
Conclusion
In conclusion, Shell stands out as an excellent dividend income share due to its decent yield, growing profits, and dedication to enhancing shareholder value through buybacks and dividends. It is undoubtedly one of the best dividend stocks currently available. When the opportunity arises in my Stocks and Shares ISA, investing in Shell will be high on my list as a means of securing a reliable second income.
