A dividend stock and an ETF I’d buy to target a £1,000 passive income!

This dividend stock and exchange-traded fund (ETF) could be great picks for investors seeking a large passive income now and in the future.

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Global stock markets are rising again as investor confidence rebounds. The MSCI world index of shares has just put in its best weekly performance of 2024. But it’s still a great time to go shopping for high-yield dividend stocks.

Years of underperformance mean many stocks across the London Stock Exchange continue to offer juicy dividend yields. While we need to guard against potential investor traps, many of these shares look in good shape to pay large (and even growing) dividends over time.

One of my favourites can be seen in the table below. I’ve also included a high-yielding exchange-traded fund (ETF) that I’d like to buy to boost my passive income.

Should you invest £1,000 in Alternative Income Reit 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 Alternative Income Reit Plc made the list?

See the 6 stocks

Dividend stockTrailing dividend yield
Alternative Income REIT (LSE:AIRE)8.3%
SPDR S&P Euro Dividend Aristocrats UCITS ETF (Dist) (LSE:EUDV)4.3%

Both of these assets offers a yield far above the FTSE 100 forward average of 3.5%. If broker forecasts are accurate, a £16,000 lump sum invested equally across them would provide me with a second income of just over £1,000 this year alone.

Here’s why I’d buy them if I had spare cash to invest today.

Alternative Income REIT

Real estate investment trusts (REITs) can be ideal for a regular source of income. For starters, they’re property stocks, meaning they enjoy a steady flow of income through their rent collections.

Alternative Income REIT has its tenants locked down on long contracts too, providing it with added long-term stability. As of June, its weighted average unexpired lease term (or WAULT) stood at a hefty 16.4 years, to the earlier of break and expiry.

On top of this, REITs must pay out a minimum of 90% of profits from their rental operations in the form of dividends. This is in exchange for certain tax advantages (like not having to pay corporation tax).

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.

On the downside, property companies can struggle to collect rents when times get tough. But of late, this particular REIT hasn’t had any problems on this front.

Collection remains strong thanks to its exposure to cyclical and non-cyclical sectors, and robust customer base (which includes FTSE 100 companies Whitbread and B&M). Indeed, the trust collected 100% of rents it was owed during the year to June.

SPDR S&P Euro Dividend Aristocrats UCITS ETF

By comparison, dividends at the SPDR S&P Euro Dividend Aristocrats UCITS ETF are more sensitive to broader economic conditions.

This fund provides exposure to 40 European heavyweight stocks. These include chemicals giant Solvay, financial services provider Generali and courier DHL. The trouble is a large number of its holdings operate in cyclical industries.

That’s not to say the companies it’s invested in have flaky dividend records. Far from it, in fact. As its name implies, it invests in Dividend Aristocrats, more specifically companies that have raised or held payouts for at least 10 consecutive years. This provides it with more solidity than many other income-focused funds.

This fund has delivered a decent average annualised return of 7.95% over the past decade. I think it could be a strong stock for investors building a dividend portfolio to consider buying.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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 B&M European Value. 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

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