Stock market

2 outstanding dividend shares for passive income

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Habitual nerd readers may gather that my interest in passive income sometimes borders on the obsessive. (In my defense, I’m over 55, so retirement is on the horizon at some point.)

My favorite form of unearned income doesn’t come from savings interest, bond coupons or buy-to-let income. Like the billionaire business tycoon JD Rockefeller, “I like to see my share of profits coming in”.

Two dividend dynamos

The big problem with cash dividends is that they are not guaranteed. Therefore, future payments may be cut or canceled at short notice. In addition, most London-listed stocks do not pay dividends to shareholders, although most do FTSE 100 firms do.

At the moment, my family portfolio consists of 18 UK stocks that we hold for passive income. For example, here are two ‘dividend champions’ that we aim to hold for years, if not decades.

1. ITV

Established in 1955, ITV (LSE: ITV) is the UK’s leading commercial terrestrial broadcaster. Alas, its core revenue from advertising has suffered as companies curb their TV spending. However, its production (content), digital, and streaming arms are doing very well.

As I write, ITV shares are valued at 72.2p. FTSE 250 Turnover at £2.9bn. That makes the stock down 8.3% over one year and 39.5% over five years. But generous dividends give these profits a substantial boost.

Currently, ITV shares offer a dividend yield of 6.9% a year – well ahead of the 4% on offer from Footsy. As shareholders from mid-2022, my wife and I like ITV’s market-beating passive income, which came in at 5p per share in 2022 and the same in 2023.

Competing for viewers with global streaming services isn’t easy, but I see ITV as a long-term hold despite weak revenue, earnings, and cash flow in 2023-34.

And now for something completely different. Founded in 1836, Legal and General Group (LSE: LGEN) is one of the UK’s leading providers of life insurance and investment products. Today, it looks after over £1.3trn of assets for almost 10 million clients.

Having worked in the financial world for 15 years, I became a huge fan of Legal & General, its management and its business model. However, while the share price has risen 9.2% over one year, it has fallen 8.9% over five years (excluding dividends).

As I write, the share price is 246.8p, valuing the storied group at £14.8bn. At these levels, the stock offers passive income of 8.2% a year – more than double the cash yield of the FTSE 100.

If I can own all this business, I will be happy. Happily, my wife and I have owned the stock since July 2022, collecting 19.37p a share in dividends in 2022-23 and 20.34p a share for 2023-24. Together, these are worth 16.1% of our initial investment. good

Of course, as a leading asset manager, L&G’s shares tend to underperform during downturns in financial markets – as happened in the 2020-21 Covid-19 crisis. Nevertheless, we have no intention of selling our share and losing out on powerful passive income!

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