One of my top investing goals is building a passive income machine. My aim is to have a portfolio of stocks that provide me with a reliable dividend income.
I’ve found three FTSE 100 stocks that all offer 8% dividend yields. Despite these unusually high yields, I think all three payouts look safe. I’d be happy to buy them with £1,000 today.
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Strong customer demand
Housebuilder Taylor Wimpey (LSE: TW) has bounced back quickly from the pandemic and reported a strong set of results last year. Underlying profits were just 2% lower than in 2019.
The housebuilding sector has boomed in recent years, thanks to strong demand for new housing and a limited supply of homes.
Although the gradual withdrawal of the government’s Help to Buy scheme is a risk for housebuilders, I think market conditions are strong enough to outweigh this risk.
Taylor Wimpey’s order book stood at 10,009 homes at the end of 2021. The company says this is equivalent to £2,550m of future sales. That’s comfortably ahead of the 9,725 units reported at the end of 2019, which were valued at £2,176m.
Broker forecasts suggest that Taylor Wimpey will pay a total dividend of 10.5p per share this year. That gives a yield just under 8%. I’d be happy to buy the shares at this level.
Sin stock passive income
There’s no escaping the fact that bad habits can pay well for investors. Tobacco is a good example. Despite the obvious concerns over health risks and future smoking rates, Imperial Brands (LSE: IMB) looks like a solid investment to me.
Since CEO Stefan Bomhard took charge in 2020, profits have risen and debt has fallen. Bomhard is investing carefully in newer products such as vapes and heated tobacco. But he’s also making sure that the core tobacco business performs as well as possible.
Imperial’s strong profits are backed by good cash generation. This gives me confidence that this FTSE 100 stock’s 8.7% dividend yield is likely to stay safe.
I already own Imperial Brands shares, so I won’t buy more right now. But I think this passive income stock looks good value today.
A little-known FTSE 100 share
You probably haven’t heard of life insurance specialist Phoenix Group (LSE: PHNX). But you probably will recognise the name Standard Life, the well-known brand that Phoenix bought from Abrdn last year.
Right now, the Standard Life brand is a relatively small part of Phoenix’s business. Most of the company’s profits come from its business running bulk pensions and maturing life insurance policies.
However, growth opportunities from these older businesses are limited. That’s why Phoenix boss Andy Briggs is putting more focus on new business, including through Standard Life.
Early results seem encouraging to me. Expected long-term cash generation from new business rose to £1,184m last year, from £766m in 2020. That’s enough to offset the decline in the mature parts of Phoenix’s operations.
In my view, Phoenix’s 7.9% dividend yield looks very safe at the moment. I don’t expect much growth, but I’d be happy to own this share for passive income.
