Stock market

2 FTSE 100 stocks that can deliver £1,640 in passive income!

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I think investing in UK blue chip shares is a great way to generate a passive income. This is why I spend almost all the spare cash I have at the end of every month. FTSE 100 Stock

But which stocks look good for paying market-beating income now and in the future? HSBC Holdings (LSE:HSBA) and Rio Tinto (LSE:RIO) There are two that have caught my eye.

Their hugely profitable output can be seen below:

Stock Forward dividend yield
HSBC 9.5%
Rio Tinto 6.9%

Based on these figures, an investment of £20,000 split equally between these shares could give me £1,640 per second income this year. Here’s why I think they’re the top stocks to consider today.

A banking powerhouse

With a large and growing focus on Asia, banking giant HSBC is facing current difficulties in China’s economy. It took a $3bn impairment charge from its stake in a Chinese lender late last year. And the coming months could see further pressure across the business.

But this should not affect the bank’s ability to generate huge profits. The company’s cash-rich balance sheet — which last year supported its highest dividend since 2008 as well as multiple share buybacks — is worth a look.

HSBC’s Solvency II capital ratio was 14.8% as of December. This was an increase of 60 basis points from the end of last year, and exceeded the company’s target range of 14% to 14.5%.

It also supports the bank’s plan to repurchase another $2 billion in shares in 2024.

It is important to note that HSBC is also set to pay a special dividend of 21 US cents per share this year. This follows the sale of its Canadian operations last month for about $10 billion.

Analysts also forecast an ordinary dividend of 57 per cent in 2024, bringing HSBC’s share yield to 9.5 per cent.

I think HSBC will be a strong passive income contributor for years to come, supported by long-term growth in Asian banking demand.

Mining star

Like HSBC, Rio Tinto has considerable financial strength that it can use to continue funding large dividends. Even the impact of weak commodity demand on profits this year is not expected to derail the mining giant.

Well, 2024 signals a third consecutive year of dividend cuts. But yields are still north of 6%. That’s thanks to the company’s strong cash flow and relatively low debt (Rio’s net debt-to-EBITDA ratio was below 0.2 times as of December).

Over the long term, I expect this FTSE business to deliver big returns (and healthy share price growth) as the supercycle of new commodities continues.

Growth of the green economy, increasing urbanization and infrastructure spending, and booming sales of consumer electronics should increase demand for industrial metals. And with supply short in some markets, the prices Rio Tinto has been asking for its products could explode.

The FTSE 100 firm has the scale to make the most of this opportunity, as well as a range of exciting research projects. Mining is an unpredictable business, but Rio Tinto has proven that it has what it takes to succeed.


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