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Having a second income stream can help to keep the wolf from the door. Trouble is, a lot of ideas for making extra cash tend to be temporary and/or involve a lot of extra effort.
But this isn’t necessarily the case with stocks. Some companies have really consistent records when it comes to distributing money to their owners in the form of dividends. And the amount tends to grow every year.
Let’s look at a couple from the FTSE 100 to consider buying, both of which are trading on low valuations.
Temporarily hated
To be fair, global distributor Bunzl (LSE: BNZL) isn’t having a very good 2025. The share price has dived over 30% following a number of announcements that didn’t sit well with investors.
Back in April, the £7.4bn cap cut its full-year guidance and suspended a share buyback due to weak trading across its North American businesses. Operating margins were also expected to fall — not exactly ideal given they’re already pretty low in the sector.
However, this sticky period is a bit of a rarity. Over the years, the stock has gradually ascended in value as investors have warmed to its boring-but-essential line of work.
Dividends look safe
But we’re looking at passive income, aren’t we? Well, the share price fall has at least succeeded in pushing up the dividend yield. As I type, Bunzl shares are forecast to offer 3.4%.
No second stream of cash is ever guaranteed, of course. There could be more bumps in the road ahead as a result of Donald Trump’s tariffs.
Considering just how essential the things Bunzl distributes are (think coffee cups and cleaning products), I’m inclined to think the risk of a dividend cut is low. The FY25 payout is set to be covered over twice by profit. That makes it a lot more secure when compared to other companies with higher yields in the FTSE 100. It’s also decent compensation for holders while they await a recovery.
The cherry on the cake is the price-to-earnings (P/E) ratio of 13. This is low compared to what buyers have paid in the past.
Dependable income stock
Another business with a good record of growing dividends is water firm United Utilities (LSE: UU). The yield currently sits at an above-average 4.6%.
This is never going to be the sort of company to get the pulse racing. But recent progress bodes well. The £8bn cap — whose works span the North West of England — reported a 10% rise in year-on-year revenue to £2.15bn. Underlying pre-tax profit also surged by nearly 54% to £338.6m.
Regulatory tailwinds
This is not say it’s always been plain-sailing for holders. Despite the predictable nature of the business, its share price can be rather volatile.
The long-term performance isn’t anything to write home about either. In the last five years, the stock has climbed just over 20%. Even with dividends added on, this pales in comparison to the sort of gains achieved by other top-tier members. The index itself is up just over 51% in value over the same period!
Still, a P/E of under 12 suggests there’s value here, especially if investor confidence improves on the back of favourable developments such as the establishment of a single water regulator in England and Wales.
