£3k in savings? Investors can consider placing it here for a nice second income
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At the end of the year, I always try and do a little personal financial statement to see how my cash flow was that year. I’m sure other investors do the same! To get more money left in savings, investors can look to spend it before we reach 2025 by making a second profit through dividends. Here’s an idea to consider for a lump sum, such as £3k in savings.
Investing over time
Some people think that the best way to invest your savings in the stock market is to put a lump sum of money to work. Honestly, I don’t agree with this approach. I can understand why some think investing the whole £3k at once makes sense, as the money can be put to work quickly.
However, a different option to consider is to divide the £3k into six parts of £500 and invest this amount each month. When it comes to equity shares, this can give the investor the ability to take advantage of opportunities as they are presented.
For example, a stock may currently have a dividend yield of 5%. However, in a month’s time, a drop in the share price could increase the yield to 6%. At that point, it might be a big deal to capture. Another case would be a company paying a dividend of 10p per share. But in annual results released a few months down the line, strong profits could mean management declaring a 15p dividend. That may be the reason for making the perfect stock to buy at that time in the future.
Increasing dividend payments
Another example of this TBC Bank (LSE:TBCG). Going back to the summer of 2022, the dividend yield was around 2.5%. At the time, it was not attractive to incoming investors. But since then, the dividend yield has been increasing, mainly due to the increase in the dividend per share. The current yield is 6.59%.
Over the past year, the stock is up 11%. The bank operates in Georgia and Uzbekistan, with significant progress recently being made in digitizing banking. Q3 results showed it had 1.4m more active digital users than the same period last year. The more customers engage, the easier it is to use and pay, which brings in more money for the bank.
Another thing that helps this bank is the economic performance of developing countries. For example, Georgia’s GDP grew by 11.1% year-over-year in the quarter! Strong growth certainly helps give the banking sector a round.
Like risk, fraud and money laundering concerns in developing countries are high. TBC will likely need to invest heavily in compliance and other areas to ensure that scandals do not surface as they continue to grow.
Various risks
If an investor parks £500 in TBC Bank and makes a dozen similar investments yielding over 6.5%, I think this could be a solid secondary income source. Profits are not guaranteed in the future, but spreading the risk across different companies helps reduce the potential impact of dividend cuts on the portfolio.
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