Starting out on an investment journey with no savings can be daunting. However, I think one of the best ways for investors to begin growing their funds is by targeting passive income.
Its often thought that we need a large sum of cash to start generating a lot of money from investing in income stocks. But this is far from true. And over time, smaller pots of cash can begin to grow.
If I had to start today, here are two stocks I’d target.
FTSE 100 stalwart
My first stop would be Legal & General (LSE: LGEN). In terms of passive income opportunities, in my opinion, I’d be hard-pressed to find many better options out there.
As I write, it currently offers investors a dividend yield of just above 9%. This places it fifth in terms of the FTSE 100 highest payers. It also sits firmly above the average of the index (3%-4%).
What’s more, the business introduced a plan to drive shareholder rewards. With it already generating £3.6bn in cumulative dividends, it’s on track to reach its target of £5.6bn-£5.9bn by next year.
Now, I do have a few concerns with Legal & General. To start, the stock has taken a hit in recent times due to the volatility seen in the financial sector following issues earlier this year. And it’s yet to recover from this.
In addition, the firm’s CEO, Sir Nigel Wilson, has been at the helm for more than a decade. However, he’s set to step down at the end of the year and this could spark uncertainty.
Regardless, as a business with a strong customer base, I remain bullish on the stock for the long term.
FTSE 250 growth stock
My next choice would be the exciting FTSE 250 company Games Workshop (LSE: GAW). The business has experienced major growth in the last five years. And as a result, so has its dividend.
Currently, Games Workshop yields around 4.5%. In the last decade, this has grown a whopping 400%.
It’s not only a growing dividend that I’m attracted to. Despite headwinds, the business has been able to post consistent double-digit revenue growth in the last few years, including 14% in its latest update.
One of the largest threats to the business is rising competition as powerhouses such as Disney try and grab a share of its lucrative market. Therefore, to offset this, it’s placed a larger emphasis on non-plastic revenue streams. The most noticeable of these is its upcoming series on Amazon.
It’s been successful in passing on costs to consumers as inflation continues to eat away at its bottom line. Yet should costs continue to rise, potential further price hikes could see customers looking elsewhere.
With its loyal customer base, I’m not too concerned about this. And with it highlighting its growth capabilities in recent times, I think the years ahead have the potential to be exciting for the business.
What I’d do
If I were starting today, I’d strongly consider both companies. I already own Legal & General stock. But with any spare cash in the weeks ahead, I’m looking to buy some shares in both. I think other investors should consider these stocks too.