Want passive income if markets crash again? I think these are the best shares to buy now!

Paul Summers identifies three stocks that should continue to be great sources of passive income even if markets crash again in 2020.

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Having a second income stream, particularly one that doesn’t require much effort, is perfectly achievable. As an investor, you simply need to own shares in companies paying dividends. And with another market crash in 2020 not out of the question, I think these are three of the best to buy now.

Market crash winner

Last week’s Q1 revenue update from online trading provider and FTSE 250 member IG Group (LSE: IGG) was short but definitely sweet for those already invested. 

Thanks to a 50% rise in the number of clients making trades, revenue for the three months to the end of August came in at £209m. That’s a stonking 62% higher than the same period in 2019! While most of this came from core markets such as the UK, EU and Australia, revenue from relatively untapped markets (dubbed ‘significant opportunities’) nearly doubled to £38.2m. 

According to IG, nearly 35,000 new clients placed their first trade in the quarter — 129% higher than in 2019. With markets likely to remain volatile, I can’t see this positive momentum slowing for a while. Even if it does, IG is still worth grabbing for its dividends.

A likely 43.2p per share payout in FY21 leaves the shares yielding 5%. Combine this with a bulletproof balance sheet and this market crash beneficiary still looks very reasonably priced. The shares trade at just 16 times forecast earnings.

Great value

With its counter-cyclical attributes, insolvency firm Begbies Traynor (LSE: BEG) is another stock to hold during tough economic times. Like IG, it also reported to the market last week.

In a statement delivered at its AGM, Executive Chairman Ric Traynor said that the number of new appointments taken on by the company had been “encouraging” and had helped increase its share of the market. Despite being disrupted by the coronavirus, the £120m cap’s property advisory and transactional services business had also managed a “solid financial performance”. Activity levels here are recovering faster than predicted.

Begbies will report its latest set of half-year numbers in December. Since insolvency levels could rise substantially between now and then as the government’s financial support for businesses ends, I think the shares look good value at 15 times forecast earnings.

The investment case becomes even stronger when you consider the dividends on offer. A predicted 3p per share payout in the current financial year translates to a yield of 3.3%.

Targeting income

A final income pick for nervous times is real estate investment trust Target Healthcare (LSE: THRL). It invests in, and rents out, modern care homes. This arguably makes it one of the most defensive businesses you’re ever likely to find on the market.

As evidence of this, Target reported collecting 96% of rent payable for the last quarter back in July. Another positive was that only five of its 71 homes (representing 15 of 4,925 beds) were reporting cases of Covid-19 at the time.

As a REIT, Target is required to return a big proportion of income to its shareholders. In FY21, this will likely be around 6.76p per share. Based on its closing price on Friday, that gives a yield of 6.2%.

When it comes to generating passive income with limited risk, it surely doesn’t get much better than this. Market crash or not, Target presents as a great dividend pick, I feel. Full-year results are due any day.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns shares of IG Group Holdings. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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