The London Stock Exchange can be a great place to shop for dividend shares. It’s home to scores of mature companies with strong balance sheets and a long-standing culture of paying large and regular dividends.
Here I’m exploring some of the best income stocks for investors to consider buying in the New Year. Here are two of my favourites:
| Dividend share | Dividend yield |
|---|---|
| Care REIT (LSE:CRT) | 8.9% |
| The Renewables Infrastructure Group (LSE:TRIG) | 9.1% |
Despite the UK’s great reputation for passive income, dividends are never, ever guaranteed. What’s more, broker forecasts can fail to match reality if earnings disappoint.
Should you invest £1,000 in Care Reit right now?
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That said, if current estimates are correct, a £20,000 lump sum invested equally in these stocks will provide an £1,800 second income in 2025.
I’m confident that they’ll meet current dividend forecasts. And that’s not all. I’m expecting them to steadily grow their dividends over time too.
Take care
Britain’s elderly population is booming. According to Office for National Statistics data, the number of people aged 85 years and over will almost double between 2020 and 2045, to 3.1m.
This provides an enormous opportunity for care home operators like Care REIT. By extension, it also means investors can expect a large and growing dividend income over time.
You see, real estate investment trusts (REITs) have to pay at least 90% of annual rental earnings out to shareholders. So when times are good, they can deliver impressive passive income streams.
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.
At nearly 9%, the dividend yield on Care REIT shares sail past the FTSE 100 average of 3.6%. But this isn’t the only reason it’s grabbed my attention as a keen value-seeker.
At 79.9p per share, the trust also trades at a 30.8% discount to its estimated net asset value (NAV) per share. This reflects the impact that higher interest rates have had on asset values more recently.
There’s no guarantee that the Bank of England will keep reducing base rates from here. But a broad drop in inflation suggests they could, which in turn could see Care REIT shares rally to narrow this discount.
Renewables giant
My final selection is The Renewables Infrastructure Group. Like the aforementioned REIT, it trades significantly below its NAV per share.
In fact, at 83.4p per share, its discount is almost identical, at 30.5%.
The group also has substantial structural opportunities, in this case growing demand for clean energy. While renewables policy in the US could be less favourable under the returning President-elect Trump, TRIG’s focus on the British Isles and Mainland Europe gives it protection from this threat.
I also like the company’s diversification across wind, solar, and battery assets, which allows it to generate power across the seasons. Finally, the fact that two-thirds of predicted revenues over the next decade have a fixed price per megawatt hour provides earnings (and therefore dividends) with extra visibility.
Keeping wind turbines and solar panels working can be an expensive, earnings-sapping business. And especially so as the number of extreme weather events rises. However, I still believe TRIG could be an excellent dividend stock to consider for 2025 and beyond.
