Want to earn a lifelong passive income? Buying dividend stocks is, in my opinion, one of the best ways to achieve just that. There’s none of the faff that involves starting a business or buying rental properties. And best of all, by using an ISA, this income can be earned and spent entirely tax-free!
To get started, investors just need two things: a small bit of cash and some top-notch, cheap dividend stocks worth buying. The latter’s the trickier task. But to help speed things along, here are two companies I’ve already added to my passive income portfolio.
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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
1. Dividends from self-storage
First on the list is Safestore Holdings (LSE:SAFE). It’s a pretty straightforward business that owns and operates a network of self-storage facilities across the UK and, more recently, Europe. Tenants pay a monthly fee proportionate to the amount of space they lease to store their belongings, and there are also some optional extras, such as insurance.
That all gets funnelled into Safestore’s coffers, which the management team then uses to maintain and expand its network of locations, as well as reward shareholders with dividends. And with just roughly £6.85, anyone can grab one share and start earning dividends.
Demand for self-storage has slowed in recent years due to a weaker property market. However, falling interest rates are starting to reheat things.
The group’s latest results showed occupancy climbing, along with revenue and profits – a trend I expect will continue in 2026 and beyond. That’s why Safestore is my fifth-largest passive income portfolio position.
There are, of course, risks to consider. The stock’s significantly underperformed lately as a result of the cyclical nature of its industry. And while it may be on the path to recovery right now, that could change in the future.
Furthermore, the company looks likely to get hit with a higher tax bill following the recent changes to business rates in the latest government Budget. Nevertheless, with an impressive track record of navigating through such storms, Safestore’s worth a closer look, in my opinion.
2. Dividends from home renovation
Like Safestore, Howden Joinery (LSE:HWDN) hasn’t been a particularly strong performer since inflation came knocking in 2022. With most households looking to avoid big, expensive projects, demand for new kitchens has softened considerably versus the pandemic. Yet unlike most of its peers, Howden’s proven to be remarkably resilient.
By expanding its customisation offerings and launching new kitchen and bedroom designs for both its premium and budget ranges, sales and earnings have remained relatively stable, allowing dividends to continue flowing and growing since 2019.
Once again, with a share price of around £8.20, investors don’t need much starting capital to start earning passive income.
But like all investments, there are still risks to consider. Stubborn inflation is driving up raw material costs, pressuring profit margins. And this impact’s only being compounded by the recent hikes in the National Minimum Wage, driving up operating costs.
Fortunately, as a highly cash-generative enterprise, Howden seems to have the strength to weather the storm and capitalise on the incoming recovery. That’s why it’s my fourth-largest income position. Yet these UK shares aren’t the only opportunities I’ve spotted. My top three look even more promising.
