With 2024 in sight, I’ve been narrowing my focus to a handful of stocks that I reckon could provide me with a growing second income. Here are two UK shares on my buy list right now.
High-quality assets at a discount
First up is BBGI Global Infrastructure (LSE: BBGI). This is a FTSE 250 investment trust with assets spread across the UK, North America, Australia, and Europe.
There are a number of things I like here. One is the attractive dividend yield on offer, currently 5.8%. That’s higher than the market average.
Another is the nature of the portfolio, which is made up of public infrastructure assets such as schools, hospitals and police stations.
These generate revenue as long as they’re available for use, and are backed by government and government-funded counterparties with AAA/AA credit ratings. In theory, this means the income should be incredibly reliable.
Finally, the contracts are inflation-linked, meaning the cash flows increase in line with a relevant price index.
Currently, the shares are trading at a 14.4% discount to net asset value (NAV). This is due to interest rate hikes, which have made alterative assets more appealing and increased the cost of borrowing. The risk is that the NAV could fall to the lower level that the share price is implying at some point.
That said, the trust has little debt, and I think we might be reaching the end of the rate hiking cycle. So I’m looking to lock in that attractive 5.8% yield while I can.
Promising medium-term outlook
Next, I’d call attention to FTSE 100 insurance giant Aviva (LSE: AV.). The stock is carrying a huge dividend yield of 7.9% for 2023. Next year, that’s forecast to rise to 8.4%, although it’s important to remember that such high yields are never guaranteed.
CEO Amanda Blanc has impressively streamlined the group’s operations over the past three years, selling off non-core businesses for a total of £7.5bn.
In H1, the firm reported an 8% year-on-year rise in operating profit to £715m, which was slightly ahead of expectations. The interim dividend was raised 8%, while a £300m share buyback programme was completed during the first six months.
Now, one potential risk I’d highlight is that Aviva is now heavily UK-focused after selling most of its international businesses. The UK is quite a crowded market with lots of competition. So this lack of geographic diversification is something to bear in mind, I feel.
Nevertheless, I’m optimistic about dividends over the medium term. Cash and capital generation remains very healthy, with operating profit expected to rise 5%-7% this year.
Plus, the balance sheet is now in much better shape than it once was, and I’d expect it to stay that way given the group’s strategic pivot to operating capital-light businesses.
Another positive worth highlighting is that company insiders have been buying shares recently. For example, Mohit Joshi, a non-executive director at the firm, bought £242,537 worth of shares on 12 October. This follows stock purchases from chairman George Culmer and Amanda Blanc in recent weeks.
It suggests these insiders see great value in the shares at today’s price of £4. And I tend to agree, which is why I’ve put the stock on my shopping list.
