Without any savings I would buy these two dividend stocks for long term income

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There is a misconception that if I don’t have any savings I can’t start investing. It’s not true. If I have an income, I can reduce some spending habits and use that money to invest in the markets. One of the best ways to build long-term savings is to invest in dividend-paying stocks that can earn me income. By reinvesting this income, I can benefit from compounding over time. With that in mind, here are two stocks I’m watching.

safe as houses

One that I think might help me perform well is Land Titles Group (LSE: EARTH). The FTSE100 Real Estate Investment Trust (REIT) has a large portfolio in central London. Over the past year, the share price has fallen by 24%, with a current dividend yield of 6.91%.

The government’s tax aid in recent weeks should help support the real estate sector. Certainly, the reduction of the stamp duty will not be very advantageous for the company. But support on energy bills for businesses will. This should allow tenants of commercial properties to pay their rent on time as cash flow problems ease.

Income tax reductions should also have an indirect benefit. The company owns leisure and retail parks. If people have more take-home pay, some of that could be spent on vacations and shopping. This increases the income of tenants who pay rent to Land Securities. As a result, occupancy levels are expected to increase, with defects decreasing.

One concern I have to take into account is the risk of a deeper recession in the UK if the tax plans do not help. In this case, I would expect to see a drop in demand for prime office space in central London, which will hurt income.

The dividend stock I didn’t know I needed

The second stock I like is DS Smith (LSE: SMDS). The packaging and recycling sector is not one of the most stylish companies on the FTSE 100. But with a dividend yield of 5.83%, it is the one that caught my eye.

Let’s start with the bad news. The stock price is down 42% over the past year. This is mainly due to the financial results which highlighted much higher costs associated with transport and energy. It’s an obvious risk, but I think it’s largely a medium-term issue that will be resolved.

On the other hand, the demand is increasing. June’s annual results showed revenue was up 21% year-on-year. Operating income also jumped 23%. This gives me confidence that if inflationary pressures can ease over the coming year but demand remains high, earnings will rise. This in turn should make way for a higher dividend per share.

I’m also a fan of the company because of the resilient demand I expect even in a recession. Recycling will remain a priority regardless of the state of the economy. Even the packaging solutions must be strong. Only if we see a significant drop in demand for packaged goods will it trickle down to DS Smith.

I’m looking to cut some expenses over the next month and use those funds to buy the two dividend-paying stocks above.