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.

| 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.

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper

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.

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.

Should you invest £1,000 in Pan African Resources 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 Pan African Resources Plc made the list?

See the 6 stocks

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.

Should you buy Pan African Resources Plc now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation 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 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.

Our best passive income stock ideas

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

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »