8.1% dividend yield! 2 dirt cheap passive income stocks I’d buy to target £1,620

Looking for top passive income stocks to buy on sale? I think these two property giants could be too cheap to ignore at current prices.

| More on:

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.

The London stock market has been underperforming for years. But it’s not all bad news. After all, investors today can now pick up some top passive income stocks at rock-bottom prices.

Two of my favourite dividend shares are shown in the table below. As you can see, each trades on a super-low price-to-earnings (P/E) ratio and carries a gigantic dividend yield.

StockForward P/E ratioForward dividend yield
 Impact Healthcare REIT (LSE:IHR) 7.7 times 8.3%
 Greencoat Renewables (LSE:GRP) 9.7 times 7.9%

If broker projections are accurate, I have a great chance of supercharging my dividend income over the next 12 months.

More accurately, a £20,000 lump sum invested equally across these stocks would give me a £1,620 passive income during the period. This is based on an average dividend yield of 8.1%.

I’m confident that these UK shares will steadily grow dividends over the long term, too. Here’s why I’d buy them for my own portfolio if I had spare cash to invest.

Cheap REIT

High interest rates are an ongoing threat to real estate stocks. They depress the net asset values (NAVs) of these companies’ property portfolios and push up borrowing costs.

But the stunning all-round value of Impact Healthcare REIT suggests now could be a great time to buy. Not only does it trade on those rock-bottom P/E ratios and carry that 8%+ dividend yield. At 85.1p per share, Impact also trades at a near-27% discount to its estimated NAV per share of 116p.

As a major care home provider, it looks in good shape to capitalise on the UK’s growing elderly population. And REIT rules mean it could be an especially good pick for future passive income.

In exchange for certain tax breaks, these shares must pay at least 90% of their annual rental profits out by way of dividends.

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.

Green dividend machine

Investing in renewable energy stocks could also deliver the holy grail of healthy capital appreciation and dividend income. Demand for clean energy is growing sharply as legislators take steps to wean their countries off fossil fuels.

I think Greencoat Renewables could be a great share to help me exploit this opportunity. The business owns onshore and offshore wind farm assets all across Europe, from which it sells power to electricity companies.

On the downside, its ability to generate power can be significantly compromised during calm weather periods.

But on the other hand, the stable nature of energy demand means its earnings aren’t affected by broader economic conditions, unlike most other UK shares. This in turn can make it a dependable dividend payer year after year.

What’s more, Greencoat’s wide geographic footprint helps reduce the threat of adverse weather patterns at group level. The bulk of its assets are in Ireland. However, its wind farms are also in France, Spain, Sweden, and Finland.

Over the long term, I think this could prove a hugely lucrative stock to own in my portfolio.

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.

More on Investing Articles

Investing Articles

2 industry-leading value stocks investors should consider buying

These value stocks are at the top of their respective industries, and look like current bargains with the potential to…

Read more »

Black father and two young daughters dancing at home
Investing Articles

Just released: our 3 top small-cap stocks to buy before August [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

If I’d put £5k in a FTSE 100 index fund 10 years ago, here’s what I’d have now!

Charlie Carman explores the performance of the FTSE 100 index over the past decade and the merits of passive versus…

Read more »

Investing Articles

£15K stashed away? I could turn that into a second income worth £49 a day!

This Fool explains how she would look to gain a second income through investing in UK stocks, and the steps…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

With the Apple share price near an all-time high, would I be crazy to buy more?

After touching all-time highs yesterday, the Apple share price is on a roll. But is there still enough growth ahead…

Read more »

Investing Articles

Nvidia stock has fallen 13% from its 52-week high! What next?

Our writer explains why Nvidia stock has dipped recently and highlights some risks associated with investing in the AI leader…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

The AstraZeneca share price is up 88% in 5 years, but is it just getting started?

The AstraZeneca share price has had a great few years, as acquisitions and clinical trials delighted shareholders. So is there…

Read more »

Investing Articles

Here’s why I’m watching the Anglo American share price

The mining sector has always interested investors. But after a flat few years, I'm wondering what's next for the Anglo…

Read more »