Stock market

5.4% yield! 2 UK dividend shares to consider £1,080 passive income

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I’m looking for the best dividend stocks to buy for market-beating passive income. And I think I’ve found two that have a rich history of dividend growth.

That’s not all. Although profits are never guaranteed, these companies – shown in the table below – offer dividend yields that average more than 3.5 percent. FTSE 100 Shares

Company 2024 dividend yield
Taylor Wempe (LSE:TW) 6.3%
Michelmarsh Brick Holdings (LSE:MBH) 4.5%

If the broker’s estimates prove correct, £20,000 invested evenly on them could fetch £1,080 in 2024. This is based on an average 5.4% forward yield.

I am sure they can increase their profits over time. Here’s why I think they’re worth considering as a second income.

In recovery

There is a huge amount of uncertainty that still surrounds the UK housing market, and with it, the earnings (and dividend) prospects of housebuilding shares.

The industry’s recovery has weakened further recently as mortgage rates have risen again. But make no mistake, the outlook has improved since six months ago. State agency Savills It has even raised its house price forecast, with average values ​​now expected to rise by 2.5%. Businesses had previously indicated a 3 percent decline.

So I am considering increasing my existing stake in construction company Taylor Wempe. Strong trade news here of late certainly points to further stabilization of conditions.

Excluding bulk sales, its net private sales rate from January 1 to April 21 was 0.69 per outlet a week. It was higher than 0.66 in the same 2023 period.

The builder’s order book was down by around £300m a year over the period. But orders still stand at £2.1bn as of April, giving it solid earnings visibility for the near term.

Taylor Wempe's dividend record.
Created with TradingView.

Taylor Wempe has a strong record of dividend growth, which was only paid out in the middle of the pandemic. And Citi analysts expect shareholder rewards to continue to grow this year, resulting in a dividend yield of more than 6%.

With a strong balance sheet – it had £677.9m of net cash as of December – it looks well placed to meet even this bullish forecast.

Another profitable hero

Reviving demand for homes also bodes well for building material suppliers like Michelmarsch. This former penny stock manufactures 125 million clay bricks and pavers every year which it sells to the construction and RMI (repair, maintenance and improvement) sectors.

Like Taylor Wempe, it is exhibiting green shoots of late recovery. In mid-May, he announced that “Speed ​​of order quantity [is] at levels not seen since late 2022.“which, in turn, is”Improving the volume and quality of the forward order book

Michelmarsh's dividend record.
Created with TradingView.

This explains why Citybrokers think Michelmarsh’s solid track record (barring outbreaks, as shown above) will continue.

And like the homebuilder I described, a strong financial base lends further strength to existing forecasts. It had net cash of £11m at the end of 2023.

Such brick makers are vulnerable to sudden rise in energy prices. But all things considered, I think this is a top dividend stock to consider, and especially at today’s price. It currently trades at a price-to-earnings (P/E) ratio of just 9.7 times.

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