2 UK dividend shares I’d love to buy for passive income!

This Fool has burned through his investment budget this month but if he had the cash, he’d grab these two passive income stocks.

| 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.

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.

The FTSE 100 is a veritable treasure trove of high-yield passive income stocks. It’s packed with top-tier companies eager to shower their shareholders with dividends.

But picking the right dividend stocks takes a bit of digging. I need to avoid value traps and choose shares in companies with solid financials and a promising future. A high yield alone doesn’t guarantee long-term returns.

I’ve been combing through the index, searching for hidden gems. While it’s been tough to narrow it down, I’ve identified a couple of standout candidates. If only my wallet were as deep as my investment appetite, I’d snap them up in a heartbeat.

Should you invest £1,000 in Aviva 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 Aviva made the list?

See the 6 stocks

Aviva

Created with Highcharts 11.4.3Aviva Plc PriceZoom1M3M6MYTD1Y5Y10YALL7 Apr 20204 Apr 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '252021202120222022202320232024202420252025200300400500600700www.fool.co.uk

Let’s kick things off with Aviva (LSE: AV.). This insurance giant has had quite a roller-coaster ride in 2024. After taking a nosedive following the acquisition of AIG Life in April, it staged a remarkable comeback, gaining over 11% year to date.

Still, it faces challenges. Past economic downturns have slashed the share price in half so it’s fair to say that could happen again. Any kind of natural disaster is a significant risk for an insurance firm. 

What really caught my eye about Aviva is its hefty 7% yield. That’s almost double the average Footsie payout and the fifth-highest on the index. There have been instances where dividends were reduced but payments have been consistent for years. They’ve grown at an average of 8.4% for the past 10 years.

Analysts are predicting a whopping 8% yield from Aviva next year — barring any unexpected cuts. And to top it off, the stock is trading at a bargain-basement price-to-earnings (P/E) ratio of 10. That looks like great value that I’d love to get in on if I had the cash.

Imperial Brands

Created with Highcharts 11.4.3Imperial Brands Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Imperial Brands (LSE: IMB) is another stock I like the look of right now. The tobacco giant made decent gains earlier this month after posting a positive trading update. Highlights included an expected 20%-30% growth in revenue and notable advances in its less harmful next-gen products. These include blu vapes, iSenzia heat sticks, and flavoured oral pouches.

However, if Imperial’s less harmful products don’t take off, it risks falling into obscurity. Smoking is a significant health concern that regulators worldwide are battling. The new Labour government is already eyeing new restrictions on outdoor smoking and has even floated the idea of banning tobacco sales to anyone born after 2009.

Meanwhile, the global smoking scene has been shrinking. In 2000, nearly a third of adults were puffing away. Now, the World Health Organization estimates that’s down to 22%, and it’s expected to drop further to 18% by 2030.

Prohibition seldom works but less harmful products might. To sweeten the deal for its shareholders, Imperial has announced a 4.5% dividend hike to just over 153p per share. But that’s not all. It’s also planning to return a whopping £2.75bn to shareholders this year. That includes a £1.25bn share buyback and a series of four quarterly dividend payments amounting to £1.5bn.

That sounds good to me! I just hope I’ll have some free capital to buy the shares soon before the share price takes off.

Should you buy Aviva shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

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.

Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands Plc. 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

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

Is Diageo still a great stock for passive income investors? Here’s what the CEO says

Here’s why the CEO of the FTSE 100’s largest drinks company thinks the firm can navigate a changing industry to…

Read more »

Investing Articles

Tesla shares plummet 50% in 4 months! Is it one of the best stocks to buy now?

Weaker-than-expected vehicle deliveries have continued Tesla's freefall, but is this volatility turning it into one of the best stocks to…

Read more »