Passive income is the Holy Grail of investing. It requires minimal input from me — beyond share picking — and it provides me with a regular, albeit not guaranteed, income.
Today, I’m looking at passive income stocks that are trading at knockdown prices. In addition to handsome dividend yields, inflated by falling share prices, I think these stocks also have growth potential in the medium-to-long term.
So let’s take a closer look at three knocked down dividend stocks I’d buy today.
Hargreaves Lansdown
Hargreaves Lansdown (LSE:HL) is a supermarket platform for stocks and funds. The firm, down a huge 41% over the past year, currently has a dividend yield of 4.6%.
The stock collapsed as it struggled to maintain its pandemic-era momentum into 2022. But evidence suggests it’s outperforming other financial services firms as it registered continued net inflows of cash and new customers in the first six months of the year.
While Hargreaves has a strong passive income offer. It is also, arguably, one of the most promising growth stocks on the FTSE 100. More and more people are taking control over their investments and Hargreaves is the UK’s top platform for doing so.
Although a deep recession might hurt new business, in the long run I’m backing Hargreaves.
Close Brothers Group
Close Brothers Group (LSE:CBG) is a UK-based merchant bank. The FTSE 250 firm provides securities trading, lending, deposit-taking and wealth-management services. It’s down a considerable 33% over the past 12 months and this has pushed the dividend yield up to 5.8%.
RBC recently noted that Close Brothers Group had defensive qualities, as it has a consistent track record of earnings, even during recessions. In fact, its loan book has continued to grow despite interest rates rising and a cost of living crisis.
In the first 11 months of its financial year, the annualised net interest margin remained strong at 7.8%, up marginally on the 7.7% recorded last year.
Once again, a deep recession and much higher interest rates may dampen demand for its services. But higher rates also translate to higher margins. I’ve already bought this stock for the dividends and defensive qualities.
Vistry Group
Housebuilders have taken a hit over the past year. Vistry Group (LSE:VTY) is down 40%, despite 2022 expecting to be a record-breaking year for the developer.
Vistry, formerly known as Bovis Homes, expects full-year pre-tax profits to come in around £417m, despite an exceptional £71.4m related to legacy cladding and fire safety. This forecast profit is £98m ahead of 2021 and broadly equal to the pre-tax profits achieved in 2018, 2019 and 2020 collectively. So it’s certainly a growing developer.
House prices are predicted to cool a little in the coming months as interest rates rise and as the cost of living crisis bites. And this will be an issue for developers and their margins. But in the long run, I see plenty of demand for property. That, and Vistry’s 8.1% dividend yield, is why I’m buying this stock.
