The stock market can be a great place for investors looking for passive income. But some are more attractive than others and sometimes the best opportunities aren’t in the most obvious names.
In my view, it’s a good idea to try and keep an eye on a range of companies from different industries and geographies. And there are a couple on my watchlist that look attractive at the moment.
Chord Energy
Shares in Chord Energy (NASDAQ:CHRD) currently come with a dividend yield above 6%. That’s quite attractive, but this is only part of the story.
In the first quarter of 2025, the company returned around three times as much cash to shareholders via share buybacks as it did through dividends. All things considered, that’s a big return.
Moreover, Chord is committed to returning at least 75% of its free cash to investors while its leverage ratio remains below 0.5. It’s currently at 0.3 and the good news doesn’t stop there.
Oil prices have risen from $60 per barrel to $72 over the last few days, but the response from the stock has been relatively placid. I think this should put it on investor radars.
The company doesn’t have the lowest production costs in the world and this can be a risk if oil prices fall again. Higher breakeven costs typically mean more pressure on profits when things are tough.
Chord might be a stock that isn’t familiar to too many investors. But I own it in my ISA and its approach to capital allocation certainly makes me think of it as one to keep a close eye on.
Diageo
By contrast, most investors probably have heard of Diageo (LSE:DGE). But with a 4% dividend yield, it’s worth wondering whether there’s any need to reinvent the passive income wheel.
There’s no question the FTSE 100 drinks manufacturer has been going through a bumpy time recently. Sales growth in the last quarter was reasonable, but a lot of this was pulled forward.
Tariff uncertainty has been leading US wholesalers to carry extra inventory in case importing spirits becomes difficult. And I expect this to weigh on sales growth as it normalises in the near future.
Despite the potential issues on the demand side, the firm’s long-term strengths remain intact. Its brands continue to lead in their respective categories and its scale is still a big advantage.
Given this, I think passive income investors should keep a close eye on the business. Over the last few years, opportunities to buy Diageo shares with a 4% dividend yield have been scarce.
Consumers might be drinking less in general, but spirits have been taking market share from beer and wine. And that might be a very positive long-term sign for the FTSE 100 company.
Opportunities
One of the best things about the stock market is that it doesn’t take a huge amount of cash to get started on a passive income journey. The big question for investors is where to begin.
I think both Chord and Diageo are stocks that investors should have on their radars. The shares might be out of favour with the market, but both businesses are focused on returning cash to shareholders.
