10.2% dividend yield! 2 value shares to consider for a £1,530 passive income

Royston Wild explains why investing in these value shares could provide investors with significant passive income for years to come.

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The London stock market is packed with brilliant value shares right now. Prices have trended broadly higher in recent weeks. But years of underperformance mean that many top stocks are still dirt-cheap at the start of May.

I’m looking at ways to make a healthy passive income at little cost. And the following dividend shares have jumped out at me during my quest. Their low price-to-earnings (P/E) ratios and enormous dividend yields can be seen below.

CompanyForward P/E ratioForward dividend yield
NextEnergy Solar Fund (LSE:NESF)8 times12%
Impact Healthcare REIT (LSE:IHR)7.9 times8.4%

If broker forecasts prove correct, a £15,000 lump sum invested equally across these shares would net me a £1,530 passive income stream. For the current financial year, the average dividend yield stands at 10.2%.

And I’m confident these businesses will steadily grow their dividends over time, too. Here’s why I think they are worth a serious look from savvy investors.

Big impact

Shares in Impact Healthcare REIT may continue trending lower if interest rates fail to fall markedly in 2024. Higher rates raise borrowing costs and weigh on net asset values (NAVs).

But this property stock still looks in good shape to keep paying market-beating dividends. Under REIT rules, the company is obliged to pay out at least 90% of rental profits in the form of dividends.

Impact’s focus on the defensive healthcare sector also provides it with reliable income streams to fund its dividend programme. The rents it receives from its residential care homes remain stable at all points of the economic cycle.

The REIT collected 99% of rents across its 140 properties last year.

This is a company with significant long-term investment potential, too. As the UK’s elderly population rapidly ages, demand for the sort of properties it specialises in is tipped to shoot through the roof (so to speak).

Estate agency Savills predicts that 144,000 new care home beds will be needed between 2022 and 2032 to meet population growth in the period.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Sun king

NextEnergy Solar Income is another passive income stock with excellent growth prospects as well. Companies all across the renewable energy sector have a huge role to play as the world gradually switches away from fossil fuels.

This particular company is invested in 102 solar assets across nine countries. I like this broad footprint as it helps reduce risk to me as an investor: operational problems can take a big bite out of profits at less diversified operators.

As with any electricity provider, NextEnergy provides me with excellent peace of mind as a dividend investor. This is because energy demand remains broadly unchanged regardless of economic conditions, giving the company the confidence and the means to regularly pay large dividends.

Keeping solar panels up and running is expensive business. This problem is becoming greater too as extreme weather events become more common.

Still, on balance I think NextEnergy is a great dividend stock to own now and in the future.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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