FTSE 100 stocks are popular with dividend investors looking to generate a healthy passive income.
The London Stock Exchange’s premier share index is packed with mature businesses that generate loads of cash. This gives them the confidence and the financial strength to reward their investors with above-average dividend payments.
Here are two FTSE 100 stocks I’d buy for a lifetime of passive income.
United Utilities Group
Buying utilities stocks can be a great way to generate long-term passive income. They have reliable profits irrespective of broader economic conditions.
This gives them (barring really exceptional circumstances) what it takes to pay big dividends year after year. As a consequence United Utilities Group (LSE: UU) has become one of the FTSE 100’s most reliable dividend growers.
Pleasingly City analysts are expecting further growth over the short-to-medium term too. This results in bulky yields of 5.3% and 5.8% for the next two fiscal years.
United Utilities provides water and wastewater services to around 7m people. It supplies services to three million households and 200,000 businesses.
My only concern with investing here is that the business operates under a strict regulatory regime. Adverse changes here can have a big impact on profits and on what it can return to shareholders.
Last week for instance regulator Ofwat slapped £150m worth of fines on 11 water companies. This was owing to them missing environmental targets. United Utilities avoided penalties but the news highlights the persistent danger of regulatory action.
Unite Group
By comparison, student accommodation provider Unite Group (LSE: UTG) has a much more chequered dividend history.
The business slashed the shareholder payouts following the outbreak of Covid-19. But having taken the pain it’s been raising dividends again as student numbers have returned.
City forecasters are expecting more healthy dividend growth for the next two years. This means that dividend yields sit at a healthy 3.9% and 4.4% respectively.
A vicious spike in Covid-19 cases and return of lockdown continues would sink profits at Unite again. But on balance I think the earnings outlook here is super robust.
The UK has been a popular destination with overseas students for centuries. This provides Unite with exceptional earnings visibility.
Encouragingly the number of pupils from abroad is rising particularly strongly today too. Official data shows that 600,000 foreign students enrolled in UK universities in 2020/2021. This was almost a full decade ahead of government targets.
Accommodation demand is particularly high amongst those from overseas. But pleasingly for Unite the number of homegrown students is also tipped to detonate in the years ahead. The Higher Education Policy Institute has said that “universities are set to see a significant rise in student numbers over the next 15 years.”
I believe Unite Group — along with United Utilities — is a great stock to buy for long-term passive income.
