Looking for ways to supercharge your passive income with UK shares? Here are two top dividend stocks whose yields for 2025 smash the FTSE 100 average of 3.5%:
Dividends are never guaranteed. But if broker forecasts are correct, a £20,000 lump sum invested equally across these businesses will generate an £1,880 second income next year alone.
Here’s why I think they’re worth serious consideration.
Passive income stocks: our picks
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’.
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Taylor Wimpey
Housebuilder Taylor Wimpey isn’t without its risks right now. A gloomy economic outlook, combined with signs of sticky inflation, casts a shadow over sector demand heading into 2025.
As if this wasn’t enough, profit warnings by Persimmon and Vistry due to cost pressures have also spooked investors. Consequently, Taylor Wimpey’s share price has plummeted since mid-October.
While worthy of attention, my belief is that these threats are already baked into the FTSE firm’s low valuation. Its forward price-to-earnings growth (PEG) ratio is just 0.5, well below the watermark of one that indicates undervaluation.
With it also having one of the London Stock Exchange’s biggest dividend yields, I think Taylor Wimpey’s an attractive value share to consider.
Britain’s housing market is springing back to life, boosted by recent interest rate cuts. Fresh data from Rightmove showed the property listings provider record “its busiest ever Boxing Day” last week for new seller activity and platform visits.
While not guaranteed, more interest rate reductions are tipped throughout 2025, which could inflate buyer demand. Rightmove itself has said it expects as many as four cuts in the New Year.
City analysts are expecting Taylor Wimpey’s earnings to grow rapidly amid predictions of a sustained market recovery. It thinks earnings will rise 23% and 18% in 2025 and 2026, leading to predictions of further dividend growth, too.
This means next year’s dividend yield rises to 8.1%.
Dividend cover for the next two years is admittedly poor. But a strong balance sheet puts the builder in good shape to meet these near-term payout forecasts. Net cash was north of half a billion pounds — £584m, to be exact — as of June.
Foresight Solar Fund
Like the housebuilders, renewable energy stocks such as Foresight Solar Fund have slumped in value in recent months.
In this case, fears over the green energy sector under returning US President Donald Trump has spooked investors. I consider this to be a top dip buying opportunity.
As well as its double-digit dividend yield for the New Year, Foresight’s shares also now boast a PEG ratio of 0.1. Furthermore, its corresponding price-to-earnings (P/E) ratio is just nine times.
It’s possible that share prices could continue to fall if confidence in renewables keeps declining. Yet in practice, Trump’s policy is unlikely to impact Foresight’s day-to-day operations. All of the FTSE 250 firm’s solar farms are located in Britain, Italy, and Australia.
With the climate change crisis driving clean energy demand, it’s my belief that share prices across the sector may recover strongly in time. In the meantime, investors can enjoy the prospect of more market-beating dividend income from investment trusts like this.
