The Motley Fool

I’d buy these 3 cheap stocks for more passive income today!

A person holding onto a fan of twenty pound notes
Image source: Getty Images.

After 35 years of investing, one thing I love is watching my share dividends coming in. Dividends are cash payments paid to company shareholders, typically quarterly or half-yearly. Nowadays, dividends provide almost all of my unearned, passive income. What’s more, dividends account for roughly half of the long-term returns from UK shares. As investment author Josh Peters wrote, “Dividends may not be the only path for an individual investor’s success, but if there’s a better one, I have yet to find it”. Here are three cheap stocks I don’t own, but would buy today for their market-beating dividends.

Passive income stock #1: Rio Tinto

The first of my cheap stocks for passive income is Anglo-Australian mega-miner Rio Tinto (LSE: RIO). At the current share price of 4,684.5p, Rio has a market value of £78bn, making it a FTSE 100 heavyweight. But at its 52-week high, the Rio share price hit 6,639.74p on 10 May 2021. After falling back (and after paying a colossal dividend to shareholders on 23 September), the Rio share price is now trading almost £20 cheaper. Thus, this mega-cap stock now trades on a price-to-earnings ratio of an ultra-low 5.4 and a huge earnings yield of 18.5%. Incredibly, this stock offers a whopping dividend yield of 10.5% a year, almost 2.6 times the FTSE 100’s 4.1%. However, weakening demand in China has pulled down metals prices, so Rio’s fundamentals could be under pressure in 2022. Even so, I still like the look of this Footsie Goliath.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Dividend share #2: British American Tobacco

The second of my stocks for generating extra passive income is British American Tobacco (LSE: BATS). As a leading manufacturer of tobacco, cigarettes, and smoking products, BAT is often shunned by ethical investors. Nevertheless, this high-yielding stock is frequently found in high-income funds and portfolios. As I write, the BAT share price stands at 2,536.5p, down 19.5p

High-yield stock #3: Vodafone

My third UK share for additional passive income is Vodafone (LSE: VOD), a telecoms giant with over 625m customers in 65 countries. Though Vodafone is a popular share in high-yielding portfolios, the stock is down 11.8% over 12 months. At the current share price of 109.11p, Vodafone is valued at £29.8bn — which several analysts consider undervalued in the wider European telecoms market. Vodafone had a tricky 2020-21, thanks to Covid-19. As a result, the group slashed its dividend by two-fifths (40%) last year, which was painful for shareholders. Nevertheless, VOD’s dividend yield of 6.9% a year remains one of the FTSE 100’s highest. And, having been cut in 2020, this cash pay-out should be more sustainable looking ahead. I rather fancy Vodafone as a long-term holding — especially as this stock lies almost 34p (-23.6%) below its 52-week high of 142.74p, set on 10 May 2021!

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.