2 cheap passive income stocks with dividend yields around 9%!

These passive income stocks offer dividend yields approaching 10%. But what else makes them excellent UK shares to invest in right now?

| 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.

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 been scouring the London stock market for passive income stocks to buy. On my wishlist are companies with huge near-term dividend yields, and the capacity to pay a decent and growing dividend over time.

I’ve also been looking for shares that offer all-round value for money. And I think I’ve found two exceptional stocks that are worth serious consideration today.

These are Alternative Income REIT (LSE:AIRE) and M&G (LSE:MNG). Here’s why I’d buy them if I had spare cash to invest.

Should you invest £1,000 in BP 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 BP made the list?

See the 6 stocks

A top REIT

Investing in property stocks can be particularly effective for passive income. The regular contracted rents they receive typically allows them to pay a stable dividend to their investors.

Real estate investment trusts (REITs) can be especially lucrative for income chasers. In return for tax perks, these firms must pay at least 90% of annual rental income to their shareholders.

Alternative Income REIT is one such company on my radar today. While some trusts invest in specific sectors, this one spreads its capital across a variety, including leisure, retail, healthcare and residential.

This provides profits — and by extension, dividends — with extra stability, as the business is more able to weather temporary difficulties in one or two sectors.

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 believe Alternative Income looks especially attractive at today’s price. At 68p, its dividend yield stands at a magnificent 9%.

Alternative Income REIT's dividend yield.
Created with TradingView

The trust also trades at a 14.3% discount to the value of its assets right now, according to Hargreaves Lansdown estimates. Its net asset value (NAV) per share is put at 80p.

High interest rates are putting pressure on the REIT’s asset values. This remains a threat but, on balance, I think it’s a top cheap income stock.

A FTSE bargain

As I say, FTSE 100-quoted M&G’s another UK share offering stunning all-round value today.

Firstly, it trades on a forward price-to-earnings growth (PEG) ratio of 0.2. Any reading below 1 implies a stock is undervalued relative to near-term profit forecasts.

Its dividend yield meanwhile, stands at a staggering 9.4%. If the City’s payout estimates are accurate, M&G stands to be one of the top three best dividend payers on the Footsie index this year.

M&G's dividend yield.
Created with TradingView

The financial services giant looks set to meet this year’s dividend forecasts too, given the cash-rich state of its balance sheet. Its Solvency II coverage ratio continues to improve and rose to 203% at the close of 2023.

Today, M&G serves around 5m customers. And as the older population grows it should have significant scope to also grow this number. Intensifying fears over the future of the State Pension alone could drive demand for savings and investment products through the roof.

However, I’m concerned about the ultra-competitive nature of the financial services market. This could compromise profit margins and M&G’s ability to increase its customer base.

But, on balance, I think the FTSE 100 firm remains highly attractive, and especially at today’s prices.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in BP 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 BP made the list?

See the 6 stocks

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 Hargreaves Lansdown Plc and M&g 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.

We think earning passive income has never been easier

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

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 »

Investing Articles

Prediction: Unilever to outperform the FTSE 100 over the next 12 months

The FTSE 100 has made a strong start to 2025, but Stephen Wright thinks a popular dividend stock could be…

Read more »

Investing Articles

I just bought this legendary S&P 500 tech stock for my ISA, 27% off its highs

This S&P 500 stock has tanked over the last month and Edward Sheldon has snapped it up for his portfolio…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 beaten-down stocks to consider for an ISA after the massive market sell-off!

The stock market has had a sudden meltdown! Yet our writer thinks these two growth stocks look attractive candidates for…

Read more »

British Pennies on a Pound Note
Investing Articles

I asked ChatGPT what the best UK penny stock was. This is what it said…

Can AI find winning penny stock investments? Zaven Boyrazian puts ChatGPT to the test and discovers a potentially interesting opportunity.

Read more »

Investing Articles

These FTSE 100 stocks could be the winners from Trump’s tariffs!

President Trump’s unpopular tariffs caused mayhem on the world’s stock markets this week. But some FTSE 100 stocks bucked this…

Read more »