2 passive income gems yielding over 5% to consider buying

This Fool explains how passive income stocks can help to create an additional income stream and details two picks she likes.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Dividend paying stocks with good fundamentals and a positive future outlook could go a long way to build a passive income stream. However, it’s worth mentioning dividends aren’t guaranteed.

Two stocks I reckon are ideal to help achieve this are WPP (LSE: WPP), and Schroders (LSE: SDR).

Here’s why I think investors should be taking a closer look at both!

WPP

The business is one of the world’s premier communications services groups, specialising in advertising and public relations.

WPP shares are down 20% over a 12-month period from 929p at this time last year, to current levels of 740p. I’m not worried about the share price drop. In fact, it could be an opportunity to snap up cheaper shares.

However, the reason for the share price drop is a risk I’ll keep an eye on. The firm has experienced a drop off in performance due to rising economic uncertainty. Advertising spending across the globe has been slashed as businesses are feeling the pinch. If this continues for a sustained period, performance and returns could be dented.

From a bullish view, WPP’s position and profile in the industry is enviable. With wide coverage, and more crucially, some of the best known businesses in the world as customers, it is an industry leader. This level of experience and reputation could help boost future performance and returns.

Furthermore, a recent partnership with artificial intelligence (AI) giant Nvidia could unlock further performance growth, which could translate into higher returns. The businesses intend to collaborate to allow WPP to create content and ads quicker without compromising quality. I’m excited by this part of the investment case.

Finally, the shares offer a dividend yield of 5.3%, which is higher than the FTSE 100 average of 3.8%. I reckon once volatility cools, WPP should see performance and its share price climb.

Schroders

Asset manager Schroders is one of the oldest businesses of its kind, with roots stretching back to 1804.

The shares are down 15% over a 12-month period from 440p at this time last year, to current levels of 373p.

It has been a tough time for fund managers like Schroders recently. Continued economic turbulence has hurt customer inflows as the world grapples with higher inflation, higher interest rates, and other rising costs. This is a risk I’ll keep an eye on when it comes to the firm’s performance and return levels.

However, I reckon Schroders, like WPP, could be a great stock to buy now ahead of greener pastures ahead. Once inflation levels normalise, and interest rates are also cut, inflows, performance, and returns could also increase.

Plus, with such a storied history and track record, Schroders knows a thing or two about navigating tricky economic times. It has the nous and experience to come out of the other side of volatility and still provide shareholder value. This experience could set it in good stead.

The shares look tempting on a forward price-to-earnings ratio of 14, which is decent value for money, if you ask me. Furthermore, I think a dividend yield of 5.7% is an attractive level of return.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Schroders Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Black man sat in front of laptop while wearing headphones
Investing Articles

Investing just £10 a day in UK stocks could bag me a passive income stream of £267 a week!

This Fool explains how investing in UK stocks rather than buying a couple of takeaway coffees a day could help…

Read more »

Investing Articles

A cheap stock to consider buying as the FTSE 100 hits all-time highs

Roland Head explains why the FTSE 100 probably isn’t expensive and highlights a cheap dividend share to consider buying today.

Read more »

Investing Articles

If I were retiring tomorrow, I’d snap up these 3 passive income stocks!

Our writer was recently asked which passive income stocks she’d be happy to buy if she were to retire tomorrow.…

Read more »

Investing Articles

As the FTSE 100 hits an all-time high, are the days of cheap shares coming to an end?

The signs suggest that confidence and optimism are finally getting the FTSE 100 back on track, as the index hits…

Read more »

Investing Articles

Which FTSE 100 stocks could benefit after the UK’s premier index reaches all-time highs?

As the FTSE 100 hit all-time highs yesterday, our writer details which stocks could be primed to climb upwards.

Read more »

Investing Articles

Down massively in 2024 so far, is there worse to come for Tesla stock?

Tesla stock has been been stuck in reverse gear. Will the latest earnings announcement see the share price continue to…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Dividend Shares

These 2 dividend stocks are getting way too cheap

Jon Smith looks at different financial metrics to prove that some dividend stocks are undervalued at the moment and could…

Read more »

Investing Articles

Is the JD Sports share price set to explode?

Christopher Ruane considers why the JD Sports share price has done little over the past five years, even though sales…

Read more »