Shares that provide passive income are my favourite. As Warren Buffett once said: “If you don’t find a way to make money while you sleep, you’ll work until you die.” That’s why I think buying dividend shares makes so much sense.
With very little work, stocks that pay meaty dividend yields can build investors serious wealth over time.
Here are two I’d buy today if I had the cash.
Should you invest £1,000 in Schroders 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 Schroders Plc made the list?
Schroders
Earnings season is in full swing. However, Schroders (LSE: SDR) shareholders wouldn’t have been best pleased to see the stock fall 8% following the release of its half-year results. For the period, the FTSE 100 business missed profit forecasts.
That now means the stock has lost 16.2% of its value in 2024. In the last 12 months, it’s down 20.8%.
But with a falling share price comes a meatier yield. The stock now pays out 6%, clearing the FTSE 100 average (3.6%) with ease. In the first half, its interim dividend stayed intact from last year at 6.5p per share.
Choppy market conditions have been the main issue weighing down its share price over the past couple of years. Pressures such as high inflation and interest rates have seen the asset and wealth manager’s assets under management wobble.
In a recent interview, CEO Peter Harrison described the trading conditions for the first few months of the year as “grim”.
But I expect the stock to bounce back as rate cuts continue in the years to come. That should provide market sentiment with a much-welcomed boost. Today, its shares look like decent value, trading on 12.8 times forward earnings.
Taylor Wimpey
Unlike Schroders, Taylor Wimpey (LSE: TW.) fared slightly better after its latest update to investors. It lifted its full-year house completion guidance, a further sign that the property market is on the mend following a difficult spell.
The stock also yields 6%. And with a strong balance sheet, including £548m in net cash, the homebuilder is in a good position to keep rewarding shareholders.
There’s plenty to suggest the years ahead could see the firm excel. The current UK housing shortage has led to the recently elected Labour government pledging to build 1.5m new homes over the next five years.
That said, the months ahead could be volatile. While we’ve seen our first rate cut, interest rates remain high. And while it’s predicted we could see more cuts this year, any sign of a delay could harm the share price.
But for long-term investors, I think Taylor Wimpey is a stock to consider. Going off forecasts, it’s currently trading on an attractive 13 times forward earnings for 2026.
£20,000 invested
With an average 6% yield, £20,000 invested in these two stocks would earn me £1,200 a year in passive income. After 30 years, I would have made £36,000.
However, if I reinvested my dividends during that time instead of withdrawing them, I’d have made £100,452, including £6,997 in passive income for year 30.
Diversification is key. So, with £20,000, I’d spread it across five to 10 stocks. Nevertheless, these two would certainly be businesses I’d consider buying.
