In my search to boost my passive income stream through dividend paying stocks, I believe I’ve identified two top stocks. These are Legal & General (LSE: LGEN) and M&G (LSE: MNG). Here’s why I’m considering buying some shares when I next have some investable cash.
Excellent passive income record
It’s fair to say that financial services stocks are at the mercy of macroeconomic volatility. However, I’m a fan of Legal & General due to its diverse offering, as well as profile, presence, and experience of navigating tough conditions in the past.
Legal & General offers insurance, investment, and pension products to its customers. The last two should help the business perform well in the longer term, especially when you consider the ageing population in the UK and people thinking about their golden years ahead.
From a risk perspective, the firm’s investment arm could come under fire due to its link to US equity and credit markets. And, as interest rates continue to rise across the pond, its performance could come under threat. Payouts could be impacted.
The shares have fallen in recent months, making them cheaper. They currently trade on a price-to-earnings ratio of six. From a passive income view, the company has an excellent record of payouts. Plus, a dividend yield of 8.8% today looks unmissable to me. However, it’s worth remembering that dividends are never guaranteed and past performance is not an indicator of the future.
Bags of experience
M&G helps consumers save and invest their money for a variety of purposes. Funnily enough, the business has lots in common with Legal & General.
Similar to Legal & General, M&G shares have taken a beating in recent months. However, this has only increased my appetite to add the shares to my holdings when I can. I believe M&G is a quality business with lots to offer. An enticing valuation today on a P/E ratio of just 10 may not be as low as Legal & General, but attractive nevertheless.
So let’s move on to passive income then. M&G’s dividend yield surpasses Legal’s, standing at a mammoth 9.7%, as I write. Bear in mind the FTSE 100 index average is 3.8%. When I think that the business has been around since the 1930s, I reckon it knows a thing or two about navigating tough times. Plus, it manages over £330bn in assets so it’s a big fish in a rather large pond.
From a risk perspective, M&G is at the mercy of the current volatility. Any stock market crash could hinder any passive income I hope to make. Dividends are usually cut or cancelled during times of volatility. A prime example of this was the pandemic as well as the financial crash of 2008. I’ll be keeping a close eye on economic developments in relation to M&G as well as my wider portfolio.
To conclude, M&G and Legal & General look like quality stocks that could boost my passive income stream. A good standing in their respective (albeit similar) markets, as well as a wide profiles and experience of navigating headwinds, help me believe these two stocks could boost my wealth.
