I buy 2 FTSE 100 shares to get a second income

A young black man makes a peace sign with two fingers

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One solution to dealing with the cost of living is to develop a second source of income. The only problem with this is that there are only so many hours in the day. That’s why I prioritize buying dividend stocks. What could be better than receiving money from companies just by holding their shares?

With that in mind, here are two examples that would be no problem to buy today as part of a defensive portfolio.

Still worth buying.

The terrible events in Ukraine reminded all countries to protect themselves. I suspect this will lead to continued increases in defense budgets across the board and create a tailwind. BAE Systems (LSE: BA)

Apparently, this fact has not escaped the attention of the market. As I type, so far BAE shares are up more than 40% in 2022. In a year of generally poor health, that should be a comfort to existing owners.

Unfortunately, this means that BAE shares are now trading at a higher price than before. A price-to-earnings (P/E) ratio of 15 might not seem high compared to your average flashy tech stock. However, it is really high for this company. A sudden end to the conflict could bring a wave of profiteering.

Despite this, I think it’s still a price worth paying.

Strong dividend

As for the dividend, BAE is a cut above the rest. But not for the reasons you might think. In terms of some shares in the FTSE 100A yield of 3.4% is actually quite average. I can get (much) more bang for my buck by investing in a house builder or miner from the top tier. So why do I love it so much?

One reason is that BAE’s payout appears to be safely covered by expected earnings. In other words, it is more likely to be paid. Secondly, the company has an impeccable record when it comes to Growing up The annual dividend. In times of high inflation which is very important to me.

With this in mind, I’m happy to buy BAE stock today, albeit for secondary income rather than capital gains.

The market leader

Another FTSE 100 dividend stock I buy is supermarket titan. Tesco (Less: TSCO) While it doesn’t have the same track record as BAE when it comes to consistent hikes for its annual payout, it has the kind of solid behavior I’m looking for.

Tesco’s reputation is beyond question. It boasted a market share of just under 27 percent last month alone. This is almost double its nearest competitor. Economic crisis or not, we all have to eat and I think the £19bn-cap makes it safe to come.

Second income

Earnings-wise, analysts expect the company to return 10.6p per share this financial year (to February 2023). This cannot be confirmed with certainty. Much will depend on Tesco’s ability to navigate several headwinds, including driving consumers away from German offers. As always, diversity comes at a cost.

But this charge translated into a 4.3% profit margin. That’s a lot more than you’d get from a regular savings account. An AP/E of 11 looks like good value for the sector.

For me, Tesco remains the best choice for tough times.

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