Here’s how I’d invest £1,000 into dividend stocks to generate passive income for life

With money to invest in August, I’m looking at two dividend stocks to boost my monthly income. The first is a mining giant, the second a huge US bank.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Lady wearing a head scarf looks over pages on company financials

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With £1,000 to invest, I’m excited to add some dividend stocks to my portfolio. I think that there’s a real opportunity to give my investment income a significant boost in August.

Right now looks like a tricky time for buying shares. In general, prices are higher than they were at the start of July.

Despite this, there are some sectors that have been doing less well lately. And I think that I can find some bargains in these parts of the stock market.

Materials

Stocks in the basic materials sector have struggled lately. These are businesses that produce things like copper, wheat, and gold.

These stocks have been struggling because the price of the commodities they sell has been falling. The price of copper, for example, has fallen by 24% in the last 12 months.

Investors are therefore expecting weaker earnings from companies that mine materials like copper. As a result, the prices of copper stocks have been falling.

I’m looking to use this as an opportunity to add shares in Rio Tinto (LSE:RIO) to my portfolio. At current prices, the stock has a dividend yield of 9.5%.

The company has recently announced that it will halve its dividend payments next year. This isn’t surprising to me, giving the lower iron ore and copper prices.

Copper, however, is crucial to the shift towards green energy. Electrification requires substantial amounts of copper and I think that Rio Tinto stands to benefit from this.

The lower dividend should help me buy shares at a lower price. I’m therefore looking to invest half of my £1,000 into Rio Tinto shares, which I anticipate being a sustainable source of passive income.

Banks

The other sector that I’ve been looking at is financials. In particular, the threat of a recession has been weighing on bank stocks. 

Banks make money by earning interest on the money that they lend out. With the possibility of a recession on the horizon, banks have been required to hold back funds.

Retaining capital instead of lending it out means that banks are unable to use part of their cash to generate income. This is likely to inhibit bank earnings.

Bank shares have been falling as a result. Shares in JPMorgan Chase (NYSE:JPM), for example, have fallen by around 30% since the start of the year.

At these prices, I’d like to add JPMorgan shares to my portfolio. The stock has a dividend yield of around 3.5%.

The risk of a recession weighing on bank earnings is very real. But I see this as a short-term headwind. 

JPMorgan’s cash reserves should see it safely through a recession, should one transpire. And when it does, I think that the bank will continue to be one of the best in its class.

As a result, I’m looking at investing the other half of my available £1,000 into JPMorgan stock in August. 

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.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Stephen Wright has no position in any of the shares mentioned. 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.

More on Investing Articles

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

If I’d put £10k in BAE Systems shares 10 years ago, here’s what I’d have now

BAE Systems shares have been on fire over the last decade. But just how much would a £10k investment back…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

My favourite S&P 500 stock is still potentially 52% undervalued

The S&P 500 is where many investors look for the next opportunity, but one of my favourites might just be…

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

Here’s why I’m watching the Glencore share price

The mining sector has always been volatile, but with some recent strategic moves, I'm watching the Glencore share price even…

Read more »

Young black female footballer training on stadium pitch
Investing Articles

My JD Sports Fashion share price prediction for the second half of 2024

The JD Sports Fashion share price hasn't yet recovered from January’s slump. So will the retailer's stock bounce back in…

Read more »

Investing Articles

Up 47% in a week! Can the Capita share price continue to rocket?

The Capita share price has smashed the market in the last week, and Harvey Jones wonders whether it has the…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

What could the second half of 2024 have in store for the BAE Systems share price?

After a strong first six months of the year, what could be coming next for the BAE Systems share price?…

Read more »

Growth Shares

2 FTSE 100 stocks that are outperforming these MAG7 members

Jon Smith reveals some FTSE 100 stocks that offer him a viable alternative to the Magnificent 7, based on recent…

Read more »

Investing Articles

My Scottish Mortgage shares just paid me £14.88. It’s another step towards making a million

Harvey Jones has just received a measly dividend from his Scottish Mortgage shares, but he's got big, big plans for…

Read more »