Could these 2 recovering UK stocks become future passive income heroes? 

Earning a passive income from shares won’t happen overnight. Looking ahead for future dividend heroes is a key part of the process.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Passive income text with pin graph chart on business table

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.

Securing a steady stream of passive income isn’t a once-off job. It takes time to identify the stocks that will keep delivering returns far into the future. Dividend stocks aim to fulfil this dream with a regular flow of income that requires little attention. But it’s not guaranteed. 

To feel comfortable dumping cash into a stock, investors need some assurance of future performance. The companies are ideally well-established with a long history of making reliable payments. Plus a decent yield, of course!

So are there any stocks like that on the FTSE 100? I think I’ve found two possible candidates.

Should you invest £1,000 in Dcc Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Dcc Plc made the list?

See the 6 stocks

Phoenix Group

My knee-jerk reaction when I see a high dividend yield like 10.8% is scepticism. Why is it so high and, more importantly, will it stay that way? With Phoenix Group (LSE: PHNX) I was pleasantly surprised to find a 13-year track record of stable or increasing dividends.

From dividenddata.co.uk

Although the brand isn’t well-known, it’s the parent company of major insurance providers Sunlife and Standard Life. It’s also been in business for almost 170 years and sports a weighty £4.86bn market-cap. Even the share price is doing okay for a value stock. It’s down a bit in five years but has held pretty steady around 600p for most of the past decade.

Created with Highcharts 11.4.3Phoenix Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

However, there are some downsides. The recent spike in UK unemployment coupled with economic uncertainty heading into a tumultuous election presents risks for the firm. Insurance is a reliable industry but cash-strapped consumers still tend to prioritise immediate needs over it. Moreso, in its latest earnings, revenue missed expectations by 27%, which was a big surprise.

Fortunately, earnings-per-share (EPS) did better than expected but still came in a loss of 14p per share. If the group’s EPS continues to decline, it could threaten dividend payments.

Looking at the firm’s track record, I don’t think that’ll happen but it’s worth keeping an eye on. Long-term, I think the consistent payment history combined with large-cap stability gives it a lot of promise.

DCC

DCC (LSE:DCC) flew largely under my radar the past few years. It provides third-party support services and resources for businesses in the energy, healthcare, and technology sectors. The brand name isn’t seen plastered around town, which may be why it eluded my attention until now.

From dividenddata.co.uk

But it has two very impressive statistics: 25 years of consecutive dividend growth with a 10-year compound annual growth rate (CAGR) of 9.85%. So while the 3.5% yield may seem small for now, it suggests a promising future. With that kind of growth, DCC could be a future dividend hero!

What’s more, the share price looks like it’s in recovery mode. It suffered in the years following the 2020 market collapse but has regained 20% in the past 12 months. And between 2012 and 2018 it shot up 400%, suggesting it performs well in a strong economy.

Created with Highcharts 11.4.3Dcc Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Still, it has some room for improvement. In the latest earnings report, revenue and EPS missed analyst expectations by 3.7% and 6.7% respectively. Net income was down 2.3% while profit margins increased slightly.

With a share price lagging behind earnings, it’s estimated to be undervalued by 37% based on future cash flows. That gives the price decent room to grow. Along with the increasing yield, it could equate to impressive returns.

But there may be an even bigger investment opportunity that’s caught my eye:

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

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.

Mark Hartley 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

£20K invested in Tesla stock last April is now worth…

Despite all the bad headlines lately, Tesla stock has put in a storming performance over a 12-month timeframe. Is this…

Read more »

Investing Articles

If a 40 year old invests £600 a month in a SIPP, here’s what they could have by retirement

With no retirement savings at 40, an investor could put £600 a month into a SIPP and grow its value…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »