Dividend deals! 2 passive income stocks that still look undervalued

Royston Wild explains why these FTSE 250 passive income stocks might STILL be too cheap to miss, despite theirrecent price gains.

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Hopes of interest rate cuts in the US and UK are pushing share prices higher again. But a huge number of British stocks still look underpriced, based on current broker projections.

Here are two I think look too cheap to miss right now.

Centamin

Gold miner Centamin‘s (LSE:CEY) share price has soared 37% over the past three months. It’s been driven by a fresh surge in metal prices. These recently touched new highs near $2,450 per ounce.

I believe this FTSE 250 mining company still offers excellent value though. It trades on a forward price-to-earnings (P/E) ratio of 9.4 times. Meanwhile, the dividend yield for 2024 stands at a chunky 3%.

Okay, there are bigger near-term yields out there. But predictions of substantial dividend growth next year still makes this a top income stock to consider, in my opinion.

For 2025, the yield on Centamin shares stomps to 6.2%.

Commodities prices are famously volatile, and are influenced by a complex interplay of factors that make them tough to predict. This in turn, poses risks to mining companies’ profits, and with it their ability to pay dividends.

But at the moment, the outlook for precious metals prices is largely encouraging. Inflation around the globe continues to exceed forecasts, while the economic recovery in major regions (like China) remains lumpy.

At the same time, geopolitical tensions between the world’s superpowers continue to simmer. And the threat of a regional war in the Middle East remains significant.

These traditional drivers for safe-haven assets are tipped by many to push gold prices still higher. Analysts at Goldman Sachs recently upgraded their yellow metal forecasts for the year’s end to $2,700.

It’s tough to predict the direction of gold prices. But, on balance, I think now could be a good time to consider Centamin’s shares.

Warehouse REIT

As I say, speculation over interest rate cuts have also boosted the share prices of property stocks more recently. Warehouse REIT (LSE:WHR), for instance, has risen 5% in value over the past month.

This real estate investment trust (REIT) will benefit from better borrowing costs and improved net asset values (NAVs) if rates come down. The danger however, is that rate cuts might not fall as quickly or sharply the market expects if inflation continues to run hot.

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.

However, at current prices I still think Warehouse REIT shares are an attractive investment. It currently deals on a forward price-to-earnings growth (PEG) ratio of 0.8. Any reading below 1 indicates that a share is undervalued.

This isn’t the only number that’s caught my eye. Today, the firm’s dividend yield for this financial year (to March 2025) is a stunning 7.2%. This reflects City predictions of strong earnings growth and unique REIT rules governing dividends.

These state that at least 90% of annual rental profits must be distributed in the form of dividends.

As demand for storage and distribution centres steadily rises, I think Warehouse REIT could be a top income stock for years to come.

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 recommended Warehouse REIT 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.

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