With an average 10.2% dividend yield, here are 2 dividend shares to consider for an ISA passive income of £1,530!

Stocks and Shares ISA investors may be able to generate a four-figure annual income by considering these UK dividend shares. Read on.

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The FTSE 100‘s packed with a huge range of cash-rich, market-leading companies boasting great dividend records. But I’m not impressed by the index’s average forward dividend yield of 3.5%. ISA investors can get much better yields today.

Take the following UK dividend stocks, for instance. Their forward dividend yields come to an average 10.2%.

Dividend shareDividend yield
Alternative Income REIT (LSE:AIRE)9.2%
Global X Nasdaq 100 Covered Call ETF (LSE:QYLD)11.1%

It’s important to remember that dividend projections can often miss their targets. As we saw during the pandemic, even the most financially robust company can slash, suspend, or cancel shareholder payouts when crises come along.

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However, if broker forecasts are correct, a £15,000 lump sum invested equally across these stocks could provide Stocks and Shares ISA investors with a £1,530 passive income this year alone.

Here’s why I think they’re worth serious consideration today.

A favourite fund

Exchange-traded funds (ETFs) can provide terrific returns while also helping investors effectively manage risk. In the case of the Global X Nasdaq 100 Covered Call ETF, individuals spread their cash across a wide range of the largest US tech companies.

The fund generates income by purchasing Nasdaq 100 shares and then selling covered calls on them. It then returns this cash to shareholders by way of dividends.

An added benefit is that the fund provides exposure to the so-called Magnificent Seven technology stocks (albeit with limited upside potential). Businesses like Nvidia, Microsoft and Alphabet have significant earnings opportunities to mine including quantum computing, autonomous vehicles and artificial intelligence (AI).

On a more sombre note, concerns over the disruptive impact of DeepSeek’s AI model could mean further volatility with the firm’s underlying holdings. It could also impact the premiums the fund collects from selling options, and by extension the dividends it distributes.

But on balance I think it’s still an attractive stock to consider, and especially for those with long-term investment strategies. Over extended timeframes, the impact of temporary market choppiness can be smoothed out.

Real estate star

Real estate investment trusts (REITs) can also be great investments for a passive income. These companies don’t pay corporation tax. And in return, they must pay at least 90% of rental profits out in dividends each year.

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.

This doesn’t necessarily guarantee a large and dependable dividend income however. Rent collection and site occupancy can slip during economic downturns, impacting rental earnings.

But well-diversified trusts like Alternative Income REIT can greatly reduce this risk. This particular one’s portfolio spans multiple cyclical and non-cyclical sectors including hotels, residential tower blocks, petrol stations, care homes and retail warehouses.

I also like this particular property share because its tenants are locked into extremely long contracts. As of June, its weighted average unexpired lease term (WAULT) was 16.5 years to the earlier of break and expiry.

What’s more, almost all of its tenants are locked into inflation-linked contracts, which substantially protects group earnings from rising costs. Almost 96% of its leases were linked to the retail price index (RPI) or consumer price index (CPI) as of June.

Of course, there are plenty of other passive income opportunities to explore. And these may be even more lucrative:

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?

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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.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Microsoft, and Nvidia. 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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