The Motley Fool

2 FTSE 100 dividend stocks I’d buy and hold to generate hefty passive income

My view has always been that investors young and old should prioritise the creation of passive income streams. It is one of the keys to financial independence and wealth creation. Sometimes this is a state that can be limited to dreams or high ambitions. “One day I will own that rental property! One day I will publish that novel! One day I will create that app!”

The ability to generate steady cash flow with minimal effort or decision-making should not be something Foolish investors merely dream of. It is a goal that can be achieved through the application of an investor’s knowledge toolkit. In many cases, passive income streams can be generated simply by sticking to the basics of investing.

Today I want to follow those basic principles and focus on two stocks that I’d rely on for passive income generation. FTSE 100 stocks may not carry the growth potential of smaller caps, but these dividend-paying equities boast increased stability that can be counted on!

SSE

Utilities may not be an exciting pick, but these equities traditionally offer enhanced stability in comparison to other dividend stocks. SSE (LSE: SSE) is a diversified utility, but like others in this sector it is facing risks due to political shifts and regulatory pressure. There is also the broader economic slowdown afflicting the UK that has seen big utilities bleed customers to smaller operators.

Still, SSE’s pivot into renewables carries promise even as the company struggles with lower profits. Value investors should take notice as SSE boasts an enticing forward price-to-earnings (P/E) of 9. The stock has climbed out of the technically oversold levels it plunged to in May, but investors with their eyes on passive income generation should focus on SSE’s offering in this key area.

In May SSE confirmed a cut to its full-year dividend to 80p per share. This still represents an attractive 7.1% yield at the time of this writing.

Persimmon

Investors on the hunt for passive income in the real estate sector often turn to REITs. Instead, I’m going to target a housebuilding giant that has sustained attractive dividend payouts in the face of cyclical challenges.

The UK government’s Help-to-Buy policy managed to boost home sales in the near term. Unfortunately, slow growth in London and southeast England is dragging down the broader market. It goes without saying that Brexit carries risks for this sector, but Persimmon (LSE: PSN) continues to hold up well. Its full-year results from 2018 should inspire confidence after its profit climbed above £1 billion, and it boasts a strong balance sheet.

The UK government’s Help-to-Buy policy managed to boost home sales in the near term. Unfortunately, slow growth in London and southeast England is dragging down the broader market. It goes without saying that Brexit carries risks for this sector, but Persimmon (LSE: PSN) continues to hold up well. Its full-year results from 2018 should inspire confidence after its profit climbed above £1 billion, and it boasts a strong balance sheet.

In the hunt for passive income I’d target Persimmon after its price point slipped in May and June.  Persimmon has a payout schedule stretching into 2021 and is slated to deliver an annual payment of 235p per share for 2019. This represents a tasty 11.8% yield at the time of this writing!

High-Yield Hidden Star?

Discover the name of a Top Income Share with a juicy current dividend yield of around 6% that has got our Motley Fool UK analyst champing at the bit! Find out why he thinks “the stock’s current weakness may offer us the chance to buy a proven dividend performer at what could be a bargain price”. Click here to claim your copy of this special report now — free of charge!

Ambrose has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.