I’m searching the FTSE 250 for the best passive income stocks that money can buy. Here are two whose big dividend yields have grabbed my attention.
Building big income
Data from the UK homes market remains quite unnerving for me. As a shareholder in several FTSE 100 housebuilders, I’m concerned about how this could impact my dividends in the short term.
Today Zoopla said that average annual home price growth has shrunk to 5.3% from 8.6% a year ago. It said too that buyer demand has dropped 51% from the same point in 2022.
But I’ll be keeping an eye on the market for an opportunity to buy some of these cheap UK shares. And Vistry Group (LSE:VTY) — on account of its 5.9% dividend yield — is one that’s on my watchlist today.
Positive signals
Trading news has been more encouraging here of late. Adjusted pre-tax profits rose 21% in 2022 even as trading conditions deteriorated as the year progressed.
Strong earnings reflect resilient demand for affordable housing in the UK, a key segment for Vistry. It’s a sub-sector that could help the company deliver better-than-average returns.
The government’s affordable homes plan looks set to miss production targets by a whopping 32,000 a year, MPs said in December. This would provide the selling prices of Vistry’s products with an added boost.
Waiting in the wings
I’m not prepared to buy the builder’s shares just yet. I think there could be safer dividend stocks for me to buy in the current climate.
This year’s dividend is covered a decent-if-not-ideal 1.7 times over by predicted earnings. I’d be looking for a reading above the accepted safety benchmark of two times given the uncertain market outlook.
That said, I’ll be looking to buy the FTSE 250 share if it becomes clear that a housing market meltdown will be averted.
A safter dividend stock?
NextEnergy Solar Fund (LSE:NESF) is a dividend share I’d happily buy today if I have cash to invest. With clean energy demand set for sustained growth, profits here could soar.
This business has invested around £1.3bn in 99 solar assets across the globe. These are predominantly located across Europe but also in the US, India, and Chile.
Such a wide wingspan has advantages for investors. Profits at solar specialists can take a hammering when the sun doesn’t shine and power generation falls. Having assets spaced out in different territories helps to reduce this risk.
Revised strategy
NextEnergy’s drive to expand its exposure to energy storage is also appealing to me. Plans announced this week would see it raise the limit on investment here to 25% of gross asset value from 10% currently.
Energy storage is critical due to the unpredictable nature of renewable energy generation. So this is a sector that is also tipped for strong growth in the coming decades.
Today the FTSE 250 stock carries a 7% dividend yield. I think it could be a great investment to turbocharge my long-term passive income.
