I’m looking for passive income! Are these the best stocks to buy?

This Fool’s on the hunt for stocks he can buy today to bolster his second income. These two have grabbed his attention.

| More on:
Close up of a group of friends enjoying a movie in the cinema

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.

I’ve made solid strides in the past couple of years when it comes to buying stocks that will help me build a stream of second income. But I have no plans of slowing down.

The FTSE 100 tends to be where I do most of my shopping. With its average dividend yield of 3.6%, it’s easy to see why. By comparison, the FTSE 250 offers an average yield of 3.2%. Overseas, the average payout from the S&P 500‘s just 1.4%.

So I’m sticking to what I know. These two shares look like they could be smart additions to my holdings. Let me delve into them further.

Phoenix Group Holdings

Where better to start than with the business that pays the highest yield on the Footsie? That’s Phoenix Group Holdings (LSE: PHNX).

Its share price has struggled so far in 2024. While many shares have rallied, Phoenix Group’s down 6.5%. It’s also down 11.6% in the last 12 months.

But not to worry. That now means it offers investors a meaty 10.6% yield. Last year, it achieved its 2025 new business cash generation target two years ahead of schedule, delivering £1.5bn.

It further achieved over £2bn of cash generation. The business’ balance sheet’s also in good shape. Those are all major positives. As a result, in 2023, it increased its dividend by 2.5%.

High interest rates will continue to pose a threat as they impact asset valuations. More widely, the insurance sector can be very volatile. Phoenix is well-known for being a cyclical business.

But focusing on the longer term, with an ageing UK population, Phoenix Group looks like it could be in a strong position to benefit in the years to come. Looking forward, analysts forecast that earnings will grow nearly 39% a year to the end of 2026.

Taylor Wimpey

I’ve also added housebuilder Taylor Wimpey (LSE: TW.) to my watchlist. It’s fared better than Phoenix Group, rising 2.8% year to date. Over the last 12 months, it’s jumped 25.7%.

That means it now yields 6.5%. Last year, its payout increased by 1.9% to 9.58p per share.

Housebuilders have struggled lately. Last year, Taylor Wimpey’s pre-tax profits fell 42.8% to £473.8m. The cost-of-living crisis has seen demand for homes decline.

What’s more, a delay in rate cuts could see it suffer in the near term. Talks of a cut in June were quickly nipped in the bud when the election was announced. It’s now looking like we’ll see the Bank of England makes it first move in August.

But when rate cuts do come, that should provide its share price with an uplift. I’m conscious about opening a position before then to benefit from a higher yield.

Lower rates should see demand rise. Management’s signalled that the property market has slowly been finding its feet in 2024, saying it had seen “continued market stability”. So some investors are optimistic that the housing sector’s turning a corner.

With that, these are two stocks I’ll most certainly be taking a closer look at in the weeks ahead.

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.

Charlie Keough 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.

More on Investing Articles

Black father holding daughter in a field of cows
Investing Articles

A FTSE 100 share that could create generational wealth

Investing in FTSE shares can help individuals pass down a significant chunk of cash to their children and grandchildren, data…

Read more »

Investing Articles

Here’s what the BT share price could mean for passive income investors

The BT share price has been falling for years, but that might be about to change. And dividends could be…

Read more »

Investing Articles

At £4.76, is the Aviva share price a steal? Here’s what the charts say!

Aviva has outperformed the Footsie over the last year. But is there still value in its share price? This Fool…

Read more »

Photo of a man going through financial problems
Investing Articles

Does a 43% price drop make this undervalued UK stalwart one of the best cheap shares to buy now?

After losing a third of its value of the past five years, this might be one of the most undervalued…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

My top 3 picks today for a £20,000 Stocks and Shares ISA

Here are three very different investments to consider for a Stocks and Shares ISA, covering both the UK and US…

Read more »

Businesswoman calculating finances in an office
Investing Articles

The Darktrace share price has been surging — and it could climb higher

I think the Darktrace share price could have more room to run. Despite the competitive AI industry, the firm looks…

Read more »

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

With its 7% dividend, should I be watching the Aviva share price?

Dividend investors will struggle to find many companies with a yield above 7%, so should the Aviva share price be…

Read more »

Investing Articles

Could this be one of the FTSE 100’s best cheap dividend shares?

Looking for the best dividend growth shares to buy? Our writer Royston Wild thinks this FTSE 100 housebuilder might well…

Read more »