Yields of up to 6.6%! 2 dividend stocks I’d buy to target a secure second income

I’m searching for ways to make a large second income even if the US and UK economies wilt again. Here are two I might add to my Stocks and Shares ISA.

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Looking for rock-solid stocks to buy for a second income? Here are two I’d buy with spare cash to invest. And I’d expect them to pay big dividends, regardless of economic conditions.

The PRS REIT

Created with Highcharts 11.4.3Prs REIT Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The PRS REIT (LSE:PRSR) share price has gone gangbusters on rising hopes of large and sustained interest rate cuts. At 97.8p per share, it’s now trading at its most expensive for two years.

Real estate investment trusts (REITs) like this can be dividend lifeboats in troubled times. They typically have their tenants locked down on long-term contracts. And so they can expect a steady stream of income at all points of the economic cycle.

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PRS REIT offers an extra layer of protection to investors. Okay, rental contracts might not be as long. But it specialises in the ultra-defensive residential property market, where rents are even more secure. Collection here was 100% between April and June, while occupancy was an impressive 96%.

One other reason I like REITs is that they’re obliged to pay a minimum of 90% of rental profits out in dividends. They do this in exchange for certain tax advantages (like exclusion from corporation tax).

As a consequence, PRS REIT carries large dividend yields of 3.5% and 4.5% for the next two financial years.

On the downside, residential rental growth in the UK’s cooling. This dropped to three-year lows of 5.4% in September, according to Zoopla. It may moderate further in the years ahead if government plans to build 300,000 new homes a year to 2029 don’t live up to expectations.

However, the rate of population growth means PRS should continue paying a large and growing dividend, in my opinion. And it’s building its property pipeline to keep earnings and dividends on an upward slant (it’a a pipeline that sits at roughly £3bn).

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.

Pan African Resources

Created with Highcharts 11.4.3Pan African Resources Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Purchasing gold’s a classic strategy during tough and uncertain economic periods and times of high inflation. Demand for the safe-haven asset tends to pick up considerably in these conditions.

This has certainly been the case in 2024. The yellow metal has hit repeated record highs, and has touched another peak around $2,600 per ounce in recent days.

The gold price continues to climb.
Created with TradingView

I wouldn’t buy physical metal or a gold-tracking exchange-traded fund (ETF) to capitalise on this though. By buying a mining stock instead, I might also have a chance of receiving a dividend.

This is why Pan African Resources (LSE:PAF) would be at the top of my own shopping list. For the next two years predicted dividends actually sit at eye-popping levels. These are 3.6% and 6.6% for the financial periods to June 2025 and 2026 respectively.

Investing in miners can carry extra dangers. Namely, Pan African Resources’ share price may plummet if it experiences production problems at its South African operations.

However, I believe this threat’s baked into the company’s rock-bottom valuation. At 32.5p per share, it trades on a forward price-to-earnings (P/E) ratio of just 6.5 times.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

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