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 PriceZoom1M3M6MYTD1Y5Y10YALLwww.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.

We think earning passive income has never been easier

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

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.

More on Investing Articles

Investing Articles

Want a comfortable retirement? Here’s how much you need in your SIPP

The SIPP is a great vehicle for confident investors to build their personal pension over time and eventually use that…

Read more »

Investing For Beginners

3 ways I try to spot cheap shares during a stock market crash

Jon Smith talks through his process of filtering for cheap shares at a time when simply buying anything isn't the…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

As share trading hits new records, here’s why I’m planning to keep buying UK shares!

Thinking like Warren Buffett and buying 'on the dip' can unlock significant long-term returns from UK shares. Here's why.

Read more »

Elevated view over city of London skyline
Investing Articles

UK stocks: a brilliant buying opportunity?

UK stocks have taken a battering in recent days. That can be disconcerting -- but our writer is taking a…

Read more »

Bronze bull and bear figurines
Dividend Shares

2 dividend shares that could provide some shelter from the market storm

Jon Smith points out a couple of dividend shares that have yields in excess of 5% -- and that have…

Read more »

Investing Articles

I’ve been snapping up shares in this 11.6% yielding FTSE 250 growth stock

As a trade war knocks a quarter of the value off this FTSE 250 asset manager in a few days,…

Read more »

Investing Articles

I asked ChatGPT which FTSE 100 stocks are screaming buys for Trump’s tariff war. Here’s what it said

As the trade war heats up and the sell-off in stocks resumes, Paul Summers is looking for great FTSE 100…

Read more »

Investing For Beginners

Analysts now expect up to 4 UK rate cuts this year! Here’s what it could mean for the FTSE 100 index

Jon Smith points to the rapidly shifting market expectations when it comes to UK interest rates and explains the impact…

Read more »