I’m expecting to have some extra cash to invest in dividend-paying UK stocks next month. So I’m searching the FTSE 100 for the best high-yield shares to buy for long-term passive income.
Here are three I’m considering adding to my Stocks and Shares ISA. I’d buy them in October and look to hold them for years.
Aviva
Financial services giant Aviva (LSE:AV) has an opportunity to grow earnings strongly during the next 10 years.
In its UK, Irish, and Scandinavian markets, the size of elderly populations are increasing rapidly. As life expectancy rises in this fast-growing demographic, people are spending more on investment products, pensions, and life insurance policies to fund their retirement and leave something behind for their loved ones.
As a market leader, Aviva is well placed to exploit this opportunity, though investors need to be aware that competition in some of its markets is hotting up. FTSE 100 rival M&G, for instance, has just returned to the bulk annuity purchase market after exiting in 2016.
However, I think Aviva’s low price-to-earnings (P/E) ratio of 9.6 times for 2023 and 8.1% dividend yield make it too good to miss.
Glencore
Near-term earnings at Glencore (LSE:GLEN) could be more volatile than those of Aviva. Tough economic conditions in major commodities consumer China mean profits (and thus dividends) could disappoint.
But I’m confident that Glencore will still pay the predicted dividends that brokers expect. This is thanks to its strong balance sheet — the FTSE firm’s net-debt-to-EBITDA ratio stood at just 0.2 times as of June.
Today the miner carries an 8.2% dividend yield for 2023. And it trades on a P/E ratio of 9.1 times. I don’t think this low valuation reflects the bright long-term outlook for metals demand that could drive earnings here through the roof.
Phenomena such as the growing green economy and the digital revolution mean huge amounts of copper, nickel, and other base metals looks set to boom. And Glencore has the scale to exploit this opportunity through acquisitions and steady investment in existing assets.
HSBC Holdings
Mounting pressure in China’s real estate market poses a threat to Asia-focused HSBC’s (LSE:HSBA) profits. This week, property giant Sunac filed for bankruptcy protection in the US in what is a fresh sign of the sector’s troubles.
Yet it’s my belief that this threat is baked into HSBC’s rock-bottom share price. Today the bank commands a P/E ratio of just 6.2 times.
I remain quite bullish on the company’s trading outlook this decade. China’s government and central bank seem prepared to step in to avert a full-blown property sector crisis. So I expect profits to soar from current levels as rising personal wealth drives retail banking product penetration from current low levels.
HSBC has the brand recognition to grasp this massive opportunity. It is also spending billions in its core markets of China, Hong Kong, and Singapore to boost its market position.
