I’m searching for the best passive income stocks to buy and hold for the long term. Here are two on my radar today.
Global X SuperDividend ETF
Largely speaking, share investing remains a great way to generate a large and growing second income. But exchange-traded funds (ETFs) are rapidly growing in popularity with investors seeking dividends. It’s not difficult to see why.
These investment vehicles help to spread risk, as they can still pay decent dividends even if one or two income stocks disappoint. In many cases, they also offer truly stunning dividend yields.
Take the Global X SuperDividend ETF (LSE:SDIP), for example. With investments in 105 global companies across different sectors, it offers exceptional diversification to limit risk. Holdings include Phoenix Group, Brandywine Realty Trust, and British American Tobacco.
As a consequence, I think the fund can be relied upon to provide a stable passive income across the entire economic cycle.
On top of this, SuperDividend’s focus on high-yield stocks means its trailing 12-month dividend yield is a whopping 11.1%. To put that in context, the FTSE 100‘s trailing yield is way back at around 3.5%.
Since the ETF invests in global equities, adverse changes in in foreign exchange rates could impact overall returns. But on balance, I think it’s a great way to target dividend income with risk in mind.
Bano Santander
I’ve not been tempted to buy popular dividend shares Lloyds and NatWest for my portfolio. While they’re tipped to pay large dividends in the short term, their capacity to deliver a huge and growing payout could be impacted by weak growth in the UK economy.
Spanish bank Banco Santander (LSE:BNC) isn’t immune to such pressures. It has significant operations on these shores, as well as across the eurozone where the economic outlook is also gloomy. In total, the bank sources 45% of earnings from Europe.
But its sprawling emerging markets operations could make it a better buy for overall shareholder returns. This could be boosted still further if — as reported — the business exits Britain as part of a wider pivot towards Latin America.
Today, Santander sources around a quarter of profits from this far-flung region. And business is growing rapidly, such as in Brazil where loans and deposits grew 9% and 7%, respectively, between July and September.
With a strong brand name and large presence in heavyweight regional economies including Chile, Mexico, and Argentina, it’s well placed to capitalise on soaring demand for financial products from a growing middle class. Research house Horizon believes Latin America’s banking sector will expand at a compound annual growth rate of 28.3% between 2024 and 2030.
I think this could lead to sustained profits and dividend growth at the bank. For 2025, the total dividend is tipped to increase 7% per year to 20.5 euro cents per share. And so the dividend yield stands at a healthy 4.3%.
While dividends are never guaranteed, Santander’s robust balance sheet means it looks in great shape to hit this target. Its common equity tier 1 (CET1) capital ratio was 12.5% as of September. Dividend cover meanwhile is a rock-solid 3.8 times.
