2 high-dividend stocks I’ve bought for passive income!

The London Stock Exchange is packed with top dividend stocks with strong yields. And I’m thinking of building my stake in these big-yielding income heroes.

| 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.

Black woman using loudspeaker to be heard

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.

I’ve been buying the best high-dividend stocks to boost my passive income. Here are two whose dividend yields beat the sub-4% average for UK shares. I think they’re still brilliant buys right now.

Boxing clever

Soaring inflation is delivering a hammer blow to the UK economy. And things are looking grimmer and grimmer as economists increase their inflation forecasts.

I think investing in property stocks is a good idea to protect myself against this threat. Real estate businesses are usually able to raise rents to offset the impact of surging inflation on their cost bases. It’s why I’m considering buying more shares in Tritax Big Box REIT (LSE: BBOX).

I first bought Tritax to capitalise on growing e-commerce activity during the 2020s and beyond. The business operates a portfolio of warehouse and distribution assets across Britain. And its assets are let to global blue-chip companies like Amazon, Tesco, Ocado and Marks & Spencer. This gives me added confidence that rental income will remain stable during good times and bad.

In fact, internet giant Amazon is by far the company’s largest customer by contracted rent. In 2021, it accounted for 16.4% of total rental income.

A top REIT to buy

Construction of so-called big box storage and distribution assets continues to lag demand by a large distance. It’s a phenomenon that is expected to persist, even as e-commerce growth slows from Covid-19 levels too. So the market in which Tritax operates is tipped to keep growing strongly.

Graphic showing expected growth of the warehousing and distribution industry
Image source: Microsoft

I also like REITs like this because they’re required to pay 90% of annual profits out to shareholders by way of dividends. It’s why the business sports a 4% dividend yield for 2022 and an 4.2% one for next year.

Sure, there are dividend shares with larger yields out there today. And Tritax could suffer some growth problems if it fails to identify suitable acquisitions.

But Tritax’s robust, inflation-resistant operations provides me as an investor with excellent peace of mind. All things considered, I think it’ll prove a top buy for long-term passive income.

6.4% dividend yield!

DS Smith (LSE: SMDS) is more likely to be impacted by the tough economic landscape than Tritax. This business manufactures packaging products that are used widely by e-retailers like Amazon. So trading is likely to suffer as consumer spending power falters.

However, I believe DS Smith’s cheap valuation reflects this risk. The FTSE 100 firm trades on a forward P/E ratio of 7.7 times following heavy share price weakness in 2022.

In fact, I’m thinking of buying more of its shares as a way to boost my passive income. Recent share price weakness leaves its dividend yields at a gigantic 6.1% and 6.4% for 2022 and 2023 respectively.

I believe DS Smith has a very bright long-term future. E-commerce has plenty more room for growth as the digital revolution continues. And I like the company’s commitment to growing its global footprint and improving its environmental credentials. Last year, it announced plans to double R&D spend to capitalise on soaring demand for more sustainable packaging.

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has positions in DS Smith and Tritax Big Box REIT. The Motley Fool UK has recommended Amazon, DS Smith, Ocado Group, Tesco, and Tritax Big Box REIT. 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

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Could the FTSE 100 be set to soar in 2024?

The FTSE 100 keeps threatening to go off on a growth spree. And weak sentiment keeps holding it back. But…

Read more »

Investing Articles

Is this FTSE 100 stalwart the perfect buy for my Stocks and Shares ISA?

As Shell considers leaving London for a New York listing. Stephen Wright wonders whether there’s an undervalued opportunity for his…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

3 things I’d do now to start buying shares

Christopher Ruane explains three steps he'd take to start buying shares for the very first time, if he'd never invested…

Read more »

Investing Articles

Investing £300 a month in FTSE shares could bag me £1,046 monthly passive income

Sumayya Mansoor explains how she’s looking to create an additional income stream through dividend-paying FTSE stocks to build wealth.

Read more »

Investing Articles

£10K to invest? Here’s how I’d turn that into £4,404 annual passive income

This Fool explains how using a £10K lump sum can turn into a passive income stream worth thousands for her…

Read more »

Investing Articles

1 magnificent FTSE 100 stock investors should consider buying

This Fool explains why this FTSE 100 stock is one for investors to seriously consider with its amazing brand power…

Read more »

Rainbow foil balloon of the number two on pink background
Investing For Beginners

2 under-the-radar FTSE 100 stocks under £2

Jon Smith identifies two FTSE 100 stocks that he believes are getting a lack of attention from some investors but…

Read more »

Investing Articles

£8,000 in savings? I’d use it as a start to aim for £30k a year in passive income

Here's how regular investing in the UK stock market, over the long term, could help us build up some nice…

Read more »