I’m trying to build up some long-term passive income from dividend shares. And if these two FTSE 100 stocks can keep paying yields of better than 6%, they could help me retire early.
Mining stocks have dropped back a bit of late, with the big dividends of the past few years falling off.
But does that mean it might be a good time now to buy into this cyclical sector?
Mining and more
If I go for it, I’ll probably buy Glencore (LSE: GLEN) shares, for a couple of reasons.
For one thing, it’s more than just a miner. It’s also one of the world’s largest commodities traders. That includes energy products and agricultural goods, so it’s a bit more insulated from the traditional mining cycles.
The other thing is the big dividend, currently forecast at 7.8%.
Suppose I put £200 a month into Glencore shares, the yield holds up, and I buy more shares with it each year. Even if the share price doesn’t move, it could build to more than £110,000 in 20 years.
And that could add a nice sum to my annual income when I retire.
Even with the commodities diversification though, I expect the Glencore dividend to be a bit variable over the years. In fact, broker forecasts expect it to drop to 6% by 2025. So there’s got to be risk of a share price fall if that happens.
But, with a bit of luck, the average yield should stay healthy. And cyclical price falls could mean good times to top up.
Manufacturing stocks tend not to be too popular in the UK. But I think those who ignore them could be missing a good thing.
Look at DS Smith (LSE: SMDS), for example. The firm makes various kinds of packaging material, and that’s got to be a safe long-term market to be in.
Yet forecasts put the stock on a price-to-earnings (P/E) of only nine. And the low share price puts the dividend yield at 6.4%.
It’s not as good as Glencore’s. But £200 a month into DS Smith could still net me a cool £95,000 in 20 years.
The firm does face rising costs. And the unpredictable nature of retail shopping makes future profits uncertain. The company had a couple of tough years in the pandemic, for example.
Still, in an October trading update, CEO Miles Roberts spoke of a “robust performance during the first half,” despite the economy this year. And he says the second half should be better than the first.
Interim results are due on 7 December. And if they’re as good as I hope, I wonder if the share price might pick up?
Oh, and in this case, the forecasts drop the P/E and lift the dividend in the next few years.
I do see cost pressure in the next few years. But I rate DS Smith shares as good long-term value.
You know, I think even value investing guru Warren Buffett might like this one.