Nasdaq recently published an article detailing Mark Cuban’s ideas on passive income. The world-famous investor is known for his role on Shark Tank and as the owner of the NBA basketball team, the Dallas Mavericks.
He made his fortune selling a tech startup during the dot-com bubble and has gone on to become a well-known and respected investor. The article outlines his preferred investment options, such as private equity, AI companies, and the S&P 500. As a contrarian investor, many of his ideas go against traditional advice.
But his feelings on dividends struck a chord with me.
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He notes how their regular cash payments equate to real-world value. The best part is, that these payments can be reinvested to maximise gains through the miracle of compound returns.
With that in mind, here are two UK dividend stocks I think he would approve of.
Powering the nation
I’m a fan of investing in companies that have long served me well. That’s why I own shares in Barclays, Tesco, Greggs, and ITV. These are businesses that I use regularly and as such, have a vested interest in their success.
National Grid (LSE: NG) is another such company. I can’t imagine there are many Brits that don’t use its services regularly. As the nation’s gas and electricity supplier, it’s kept lights on and homes warm for centuries.
Earlier this year, it announced a planned 15% dividend cut that will reduce the annual payout from 53.1p to 45.3 per share. That will bring the yield down from 5.46% to around 4.5%. The cut is part of plans to raise £7bn to support a transition to renewable energy.
I’m a fan of renewable energy but the announcement didn’t sit well with most shareholders. The share price fell almost 20% in the five days following the news. However, I’m a firm believer that renewable energy will be a highly profitable industry in the future. It’s a sacrifice today that could end up being highly beneficial for the company — and the environment.
Housing the nation
Taylor Wimpey (LSE: TW) is one of the UK’s most prolific homebuilders. It’s been tipped to benefit from the new Labour government’s positive stance on affording housing.
With the shares up 40% in the past year, it’s already getting ahead of itself. In its latest half-year results, it increased its home completion target for 2024. Dividend-wise, it has an attractive 6% yield and has increased dividends over the past few years.
However, it’s still recovering from the 2008 housing market crash. Before pausing dividends entirely in 2008, its annual payout was 15.75p per share. It’s managed to climb back to 9.58p but any further market volatility threatens future payments.
For now, momentum is good. Dividends have grown at an average of 29% per year for the past decade. With earnings forecast to grow, its forward price-to-earnings (P/E) ratio is 17.5. Its trailing ratio has risen from 14 to 23 this year, so a potential reduction is a good sign.
Housing is always risky during times of economic instability. But with things improving, I like Taylor Wimpey’s odds. I consider the stock a great addition to my income-focused portfolio.
