9%+ yields! 2 dividend stocks to consider to target a £1,870 passive income

These dividend stocks could be an effective way to generate passive income now and in the future. Here’s why.

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Buying high dividend stocks can be a great way to transform an investor’s wealth. The large passive income they provide can help fund a lavish lifestyle today. Or they can be reinvested back into the stock market to deliver spectacular compound returns.

Dividend shares across the FTSE 100 and FTSE 250 have fallen in recent sessions. And so the gigantic yields of many passive income shares have become even more attractive.

The following top stocks now offer forward yields above 9%. It means that a £20,000 lump sum invested equally across them could provide a £1,870 passive income over the next 12 months.

Passive income stocks: our picks

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

Here’s why I think they’re worth serious consideration by savvy investors.

Created with Highcharts 11.4.3Legal & General Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Dividend yield: 9.4%

Legal & General (LSE:LGEN) looks in great shape to continue paying above-average dividends to its investors. With a Solvency II ratio of 224%, it has one of the strongest balance sheets in the UK financial services sector.

However, investors have given the company’s new dividend policy announced last week a big thumbs down. In it, chief executive António Simões — who’s been steering the ship since January — announced plans to grow shareholder payouts by 2% from next year to 2027.

This is down from a previous target of 5%. Accordingly, Legal & General’s share price has plummeted. I think the market may be ignoring the bigger picture here however.

First off, the company plans to offset lower dividend growth with share buybacks, starting with a £200m programme this year. Putting the brakes on payout growth also gives the Footsie firm more money to invest for growth which, in turn, could lead to greater share price appreciation and dividend increases over the long term.

I’m particularly encouraged by Legal & General’s decision to focus more closely on the massive pension risk transfer (PRT) market. It intends to write up to £65bn of PRT business in the UK by 2028 alone. There’s also considerable opportunity to make profits in the US, Canada and the Netherlands.

Higher-than-normal interest rates are a problem for Legal & General’s asset management balance. But, on balance, I think this is a top dividend stock to consider today.

Alternative Income REIT

Created with Highcharts 11.4.3Alternative Income REIT Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Dividend yield: 9.3%

Purchasing real estate investment trusts (REITs) also has considerable investment appeal. These financial vehicles — of which I already hold several in my portfolio — have to pay 90% of annual rental profits out by way of dividends.

Alternative Income REIT (LSE:AIRE) is another I’m considering buying today.

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.

I like the fact this property stock invests its cash across a wide range of different assets (like care homes, petrol stations, flats and power stations). This gives it the means and the confidence to pay large dividends at all points of the economic cycle.

I also think this trust has significant scope for share price appreciation. At current prices, it trades at a 17% discount to the net asset value (NAV) of its property portfolio.

Alternative Income could begin making up this difference as interest rates are cut, presumably over the summer. But remember that any easing of Bank of England policy remains just speculation at this point. If rates fail to budge, this could cause the REIT’s share price to weaken further.

Our analysis has uncovered an incredible value play!

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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 positions in Legal & General Group Plc. 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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