As a committed Fool, I try to only buy stocks that I’d want to own for years. Even so, I can’t deny the attraction of snapping them up just before they go ex-dividend and securing some lovely passive income from the off.
Here are three that I’m currently thinking of adding to my portfolio very soon.
On my (income) radar
An increasingly unstable Middle East and the ongoing, dreadful conflict between Ukraine and Russia has led to an earnings purple patch for passive income powerhouse BAE Systems (LSE: BAE). Looked at purely from an investment perspective, this should mean that the company will have no issue in continuing to distribute dividends to shareholders.
Sure, nothing is guaranteed. Defence spending can be lumpy for a start. BAE stock also trades at 19 times forecast earnings. That’s far above its five-year average.
On the other hand, the FTSE 100 beast has the sort of income track record that would turn most companies (and their investors) green with envy. We’re talking about dividends rising year-after-year for decades. I just can’t see that trend ending anytime soon.
This stock goes ex-dividend on 24 October. So, I’ll need to make a decision soon if I want to receive the 12.4p per share interim payment.
Chunky dividends
Also going ex-dividend is homewares retailer Dunelm (LSE: DNLM).
Despite the cost-of-living crisis, shares in the Leicester-based business have climbed 16% in the last 12 months. That’s almost identical to that achieved by the FTSE 250 index as a whole. But I wonder if the former might just outperform from here if interest rates continue falling and consumer confidence improves.
Buying a slice of this company before Halloween would entitle me to a 27.5p per share final dividend. Moving forward, analysts have already penciled in a 15% jump to the FY25 payout, assuming their earnings projections are correct. If this came to pass, that would mean a chunky dividend yield of 5.7% using today’s price.
I find it best to treat forecasts with a smidgen of salt. A bounce in inflation could easily interrupt this momentum.
Fortunately, a trading update is scheduled for 17 October. I’ll give this a read before making any move.
Back on track?
A final candidate is real-estate investment trust (REIT) Tritax Big Box (LSE: BBOX).
With big-name clients including Amazon, Tesco, and – yes – Dunelm, it was no surprise that this company became very popular with investors over the pandemic as demand for logistics space soared.
Unfortunately (but somewhat inevitably), the good times couldn’t last. As interest rates were lifted to tackle inflation, anything property-related was dumped from many portfolios.
Tritax shares have now been trading roughly between 165p and 125p since for about two years. Still, at least investors have enjoyed some payouts in the meantime. Again, the gradual lowering of rates could provide a welcome boost to the price and the income stream.
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.
Speaking of which, this stock also goes ex-dividend on 31 October (1.825p per share). Analysts currently have the company yielding just over 5% for FY24, rising to 5.3% in 2025.
Given that I already have exposure to property in my portfolio, I’m going to do a bit more digging over the next couple of weeks before I decide whether to buy here.
