Many investors are looking for ways to turbocharge their passive income in the New Year. Fortunately the London Stock Exchange is bursting with high-yield heroes following years of share price underperformance from top dividend stocks.
Here are two I think are worth serious consideration today. As we can see, the forward dividend yields on these companies sail above the 3.6% average for FTSE 100 shares.
| Dividend stock | Forward dividend yield |
|---|---|
| iShares MSCI Target UK Real Estate (LSE:UKRE) | 7.7% |
| BlackRock World Mining Trust (LSE:BRWM) | 7.1% |
Dividends are never guaranteed. But if broker forecasts are correct, just over £27,000* equally invested across these UK shares would deliver a £2,000 passive income this year alone.
I’m optimistic that these companies will deliver a growing dividend income over time as well. Here’s why I think they’re worth serious consideration today.
* £27,030 to be exact.
iShares MSCI Target UK Real Estate
My first pick is an exchange-traded fund (ETF) rather than an individual stock. By investing in more than 30 different assets, this particular instrument allows investors to spread risk while at the same time targeting a large passive income.
Major holdings here include Segro, Land Securities and Unite. But the fund doesn’t only invest in property stocks and real estate investment trusts (REITs). It also holds capital in fixed income securities such as gilts.
There’s a danger that returns here could disappoint if interest rates remain above recent norms. Property businesses suffer during such periods as net asset values are depressed and earnings impacted.
But I believe it could still be a great source of passive income looking ahead. This is thanks in part to its large weighting of REITs. These businesses are obliged to pay at least 90% of their annual rental profits out by way of dividends.
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.
BlackRock Mining Trust
The BlackRock Mining Trust provides the same sort risk reduction through diversification. It holds shares in more than 60 raw materials producers including industry heavyweights Glencore, BHP and Rio Tinto.
Now, parking one’s cash in commodities producers can be high-risk. Problems at the exploration, mine development and production phases can be common. And each can take a massive chunk out of company earnings.
Investing in this fund doesn’t eliminate this danger. However, it does limit the impact of issues at one or two miners on overall returns.
I also like this fund because of its exposure to a variety of metals like gold, silver, copper, uranium and aluminium. Commodity prices are notoriously volatile on a range of supply and demand issues. The fund’s wide approach type helps limit this risk.
What’s more, its balanced allocation across investment metals and industrial commodities can provide a smoother return across the economic cycle.
I think Blackrock Mining Trust could deliver solid capital gains and dividend income as the new commodities supercycle kicks off. Phenomena including renewable energy growth, the emergence of artificial intelligence (AI), and rising demand for electric cars could light a fire under global metals demand.
