I’m looking to treat myself this Christmas with some brilliant bargains from the FTSE 100 and FTSE 250. Here are two cut-price dividend stocks that could make me a healthy passive income in the new year.
Supermarket Income REIT
Real estate investment trust (REIT) Supermarket Income REIT (LSE:SUPR) has taken off in recent weeks. Its shares have boomed on hopes that the Bank of England (BoE) has come to the end of its rate-raising cycle.
This recovery could continue in 2024, although hawkish comments from BoE policymakers on interest rates could equally pull the firm lower. Yet I believe the property stock is an excellent buy for what could be a tough year ahead.
This REIT lets out supermarket space to the country’s biggest grocers, including Tesco and Sainsbury’s. It also has its tenants tied down on long-term contracts. Indeed, its weighted average unexpired lease term (WAULT) stood at an impressive 14 years as of September.
These qualities mean Supermarket Income REIT can expect rents to keep rolling in, even as the UK economy struggles.
What’s more, the company’s tenancy contracts have inflation-linked rent increases built into them. This provides additional scope for the company to grow profits and continue paying large dividends to its shareholders.
For this financial year (to June 2024) the firm carries a meaty 7.6% dividend yield. And at 80.4p per share, it trades at a decent discount to its net asset value (NAV) of around 97.7p. This sort of excellent all-round value is tough to ignore, in my book.
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Box manufacturer DS Smith (LSE:SMDS) faces some uncertainty heading into the new year as the global economy struggles for traction. It could well endure weak demand for its packaging if consumer spending remains under the cosh.
Half-year results this week illustrated the pressure the company is currently under. It showed revenues and pre-tax profits down 18% and 15% respectively between May and October. Despite strong pricing, a 4.7% decline in like-for-like volumes compromised its performance.
However, green shoots of recovery are emerging that could lift DS Smith’s shares higher in the months ahead. The firm said that “with destocking among our customers now largely over, we are seeing signs of volume improvement, with the second quarter performance being better than the first“.
DS Smith is a FTSE 100 share I’ve owned for years. I expect demand for its sustainable packaging to rise strongly this decade as e-commerce growth continues and environmental concerns increase. And this should push profits steadily higher.
The company also has a strong balance sheet it can use for additional acquisitions to drive growth. Its net debt to EBITDA ratio stood at just 1.7 times as of October. This was well below its target of 2 times.
I’ll be looking to increase my holdings at the next opportunity, given its excellent all-round value. The packaging giant trades on a P/E ratio of 9.1 times for the financial year ending April 2024. It also packs a solid 5.7% dividend yield.