Surprisingly, this wasn’t enough to top the mid-cap index gainers, as iron ore pellet producer Ferrexpo surged 21% higher.

Normally I’d be delighted to see this type of one-day rise from a stock in my portfolio. And I’m certainly not complaining, especially as it had been drifting somewhat aimlessly over the past year. Yet, it’s still bittersweet…

What happened

BBGI has agreed to be acquired by Canadian pension fund manager British Columbia Investment Management for £1.06bn. 

Under the terms of this proposed all-cash deal, BBGI shareholders like myself will receive 147.5p per share. This is a premium of 21.1% to the closing share price yesterday, and 20.1% more than the previous three-month average. 

On the offer, CEO Duncan Ball said: “Since its launch in 2011, BBGI has grown to become one of the UK’s largest listed infrastructure funds, with a globally-diversified portfolio of 56 low-risk, core infrastructure assets that deliver sustainable and long-term index-linked cash flows. Over this period, we have delivered a total net asset value [NAV] return of 176.3%.”

The actual return has been less, mind, as the trust has been trading at a double-digit discount to NAV. Indeed, just last week (31 January), I wrote: “I think [BBGI] shares look very attractive at 121p.This leaves them 18.4% below the portfolio’s net asset value (NAV) of 148p, as at 30 June.”

I ended with: “If and when interest rates move lower, I think the share price could recover strongly as investors reassess the high-quality income on offer.”

It appears the fund isn’t waiting about to find out — the share price might not have bounced back — and the board is recommending shareholders vote through the deal.

Why am I sad?

For me, it’ll bring this investment firmly back into positive territory. Indeed, when I factor in the dividends I have received, the total return will be around 10% since I invested just under a year ago.

Not bad, but I was expecting a lot more over time. BBGI’s portfolio is made up of high-quality projects like healthcare facilities, tunnels, and toll bridges. The sort of things that aren’t going anywhere and tend to throw off reliable cash to fund dividends.

The forward dividend yield had crept above 7%, while management was recently boasting that BBGI had another 15 years of dividend growth left in the tank from its existing portfolio. Hey ho.

What will I do?

BBGI plans to declare an interim dividend before the deal is completed. If I take that, the offer price will be reduced by the dividend amount. The current share price of 143p largely reflects this.

I won’t be hanging around now, though. I’ll sell up and move on.

Lots of value around

This is the second business in my portfolio in the last couple of months to be acquired at a significant premium. Small-cap AI firm Windward rocketed 70% higher in the days leading up to Christmas.

What this proves is that there is still a lot of unrealised value about today in cheap UK stocks. I expect a lot more shareholder value to be unlocked across the FTSE 350 this year.

The post My favourite FTSE dividend stock just jumped 17%! So why am I sad? appeared first on The Motley Fool UK.

Here are three mid-cap options I think are worth considering today.

Dividends and value

First up is BBGI Global Infrastructure (LSE: BBGI). This Luxembourg-based fund offers an appealing government-backed 7.1% dividend yield, based on 2025 forecasts. That’s more than double the FTSE 250 average.

The high yield’s due to two factors. First, the company has an excellent track record of dividend increases (13 years), driven by the stable nature of the underlying assets. These 56 social infrastructure projects across G7 countries include schools, hospitals, roads, and toll bridges. They earn BBGI inflation-linked revenue.

Second, the share price has dropped 32% in two and a half years, pushing the yield skywards. This is due to higher interest rates that have made cash and bonds look like a safer bet than infrastructure shares. Therefore, a higher-for-longer rate environment or a sudden spike in inflation are risks here.

However, I think the shares look very attractive at 121p.This leaves them 18.4% below the portfolio’s net asset value (NAV) of 148p, as at 30 June.

If and when interest rates move lower, I think the share price could recover strongly as investors reassess the high-quality income on offer.

More dividends

The second option to consider is BlackRock World Mining Trust (LSE: BRWM). This trust invests in mining stocks from around the globe. Top holdings include Glencore, BHP Group, and Rio Tinto.

These mega-miners provide indirect exposure to the green revolution through their production of key materials needed for clean energy technologies. That includes copper, essential for electric grids, wind turbines, and solar panels, as well as nickel, lithium, and cobalt, which are needed in many electric vehicle (EV) batteries.

Now, the risk here is that the performance of these stocks is influenced by the price of commodities, many of which are impacted by goings-on in China. And things haven’t been going well in the world’s second largest economy since the pandemic.

This is reflected in the mining trust’s share price, which is down nearly 30% since the start of 2023.

While commodity prices could always take a tumble, threatening mining profits and the trust’s dividend yield, I think the shares are worth considering at 496p. At that price, there’s a respectable 6.7% yield and 8.3% NAV discount.

Going for growth

The final FTSE 250 stock worthy of consideration is Baillie Gifford US Growth Trust (LSE: USA). The focus on US growth shares might be obvious but we’re talking the crème de la crème, including Amazon, Shopify, Netflix, and Instagram owner Meta Platforms.

But what makes this one different from a run-of-the-mill tech fund is its investments in private companies such as rocket pioneer SpaceX and Stripe (internet payments).

One risk here is a sudden slowdown in artificial intelligence (AI) infrastructure spending. That might damage investor sentiment for top holdings like Nvidia, leading to pressure on the trust’s share price.

Longer term though, I see this as a solid option for direct and diversified exposure to the global technological revolution. A 9% discount to NAV adds weight to the investment case, in my opinion.

The post 3 investment trusts from the FTSE 250 to consider in February appeared first on The Motley Fool UK.

Here, I’ll set out three simple steps that could help turn a portfolio into a more reliable dividend machine.

Don’t assume everything that glitters is gold

Rather than getting excited at the prospect of a mouth-wateringly high dividend yield, I reckon it’s better to see it as a red flag. Or at least initially while investigative work begins.

Stocks offering exceptionally high yields are often compensating for underlying business risks, such as declining earnings, a massive debt pile, and/or weak cash flow.

One simple thing to check is the free cash flow (FCF) payout ratio. This measures the percentage of a company’s FCF paid out as dividends. It’s calculated by dividing dividends paid by FCF.

A high ratio could indicate that the company is allocating most of its available cash to dividends, leaving little for growth investments or emergencies.

That said, every stock is different, and FCF is just one factor to consider when evaluating a company’s financial health and prospects. And, of course, dividends are never guaranteed.

But by assuming that massive yields are potential red flags, it should reduce the risk of diving head-first into a yield trap.

Diversify the portfolio

The second step is to diversify across different sectors and companies. We’ve seen recently how UK housebuilders have been crushed, with earnings and dividends down substantially across the industry.

A portfolio brimming with housebuilders would be a misfiring machine, as both the value of the shares and the income from them would be under severe pressure.

Fortunately, there are many sectors and different types of options, including investments trusts. One of my favourite is BBGI Global Infrastructure (LSE: BBGI) from the FTSE 250.

This is an investment trust that owns and manages infrastructure projects through public-private partnerships. These include bridges, hospitals, motorways, and schools across Europe, Australia, and North America. These assets generate stable, government-backed income.

As the chart above shows, investors have turned bearish on BBGI stock. That’s primarily due to the higher interest rate environment, which makes the financing of new projects much more expensive. If inflation spikes and rates stay elevated for longer, the share price could continue to struggle.

However, the forward yield is now 7%. I reckon that’s attractive for a company that estimates its portfolio could continue paying a progressive dividend for the next 15 years, without needing further acquisitions.

The share price hasn’t been this low since 2015.

Reinvest dividends

Finally, one of the most powerful tools in building future passive income is compounding.

To really fuel this wealth-building phenomenon, an investor would reinvest cash dividends rather than spend them. This allows a portfolio to grow faster over time, as each reinvestment increases the future income potential.

Many brokerage platforms now offer dividend reinvestment plans (DRIPs) that automatically reinvest dividends at little or no additional cost. I did this back in October with the last payout from my BBGI shares.

Over the years, the effect can be dramatic. For example, £5k invested in a stock that goes nowhere but yields 7% consistently would become £20k inside 21 years, due to the power of compounding dividends.

The post 3 steps to build a passive income machine in 2025 appeared first on The Motley Fool UK.

Vital infrastructure

The first mid-cap stock is BBGI Global Infrastructure (LSE: BBGI). This is an investment company that owns and manages infrastructure projects, primarily through public-private partnerships.

BBGI’s portfolio of 56 assets includes motorways, bridges, healthcare facilities, and schools across Europe, Australia, and North America. These projects generate stable income that is government-backed and inflation-linked.

The forward dividend yield currently stands at a market-beating 6.5%. And this year’s dividend is well-covered at around 1.4 times cash flows.

One risk here is a spike in inflation, which could derail the expected lowering of interest rates. This would be negative for both the funding of new projects and sentiment towards BBGI shares.

However, I’m encouraged that the company is in a very strong financial position. At the end of June, it had no long-term debt at group level and net cash of £20.6m.

Looking ahead, management estimates the portfolio could continue to generate a progressive dividend for the next 15 years, without any further acquisitions.

With BBGI trading at a 12% discount to net asset value (NAV), the stock looks like a long-term bargain to me. It’s historically traded at a premium, and the share price remains 27% off its all-time high from 2022.

GP landlord

My second pick is Assura (LSE: AGR). This is a healthcare real estate investment trust (REIT) that owns 625 properties, mainly GP surgeries and other medical establishments. 

These locations are primarily rented out to the NHS, which provides a recurring and predictable revenue stream. The company also recently acquired 14 private hospitals for £500m. With the NHS system “broken” (according to the government), there is surging demand for private health services in the UK.

However, one concern I have is that Assura had net debt of £1.5bn at the end of September. High levels of debt aren’t uncommon for REITs, but its weighted average interest rate on debt increased from 2.3% to 3% this year. So the high-rate environment continues to be a challenge.

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.

On balance though, I like the stock. Demand for healthcare facilities is expanding due to a UK population that is both ageing and growing rapidly.

As CEO Jonathan Murphy recently pointed out: “The UK healthcare crisis is getting more severe by the year, which in turn is driving increased demand for healthcare infrastructure. The requirement for investment in this space has received cross-party political support.”

The dividend yield is 8.2%. But with interest rates expected to fall, REITs could become more attractive, driving up share prices. This means the ultra-high yield might not last long.

Targeting £1k a year in passive income

Dividends aren’t guaranteed to be paid, of course, but I reckon these two are solid options. Combined, they’d offer an average yield of 7.35%.

This means I’d need to split approximately £13,610 between these two stocks for £1,000 a year in passive income. That would leave me nearly £6,500 of my annual ISA allowance to buy other dividend stocks.

The post I’d buy this pair of high-yield FTSE 250 stocks to target £1,000 a year in passive income! appeared first on The Motley Fool UK.

Let me explain why I’m a fan, and describe one stock I’d love to buy to help me make the most of my ISA.

Why this ISA?

There are a few reasons why this particular type of ISA is attractive to me. When it comes to building wealth, dividends are a great way to help me do this.

If I buy shares within the ISA, any dividends I receive aren’t liable for tax, meaning I get to keep them, helping me build a pot of money faster. I could even let them compound for a number of years to get that pot really growing.

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.

The other aspect of the ISA which is attractive is the generous allowance I’m able to invest. Over a year, I can invest up to £20,000. I may not have £20k every year, but if I have disposable funds to invest, I could go up to that amount. This gives me great flexibility to really put my money to work to help me build wealth for the future.

Infrastructure building

When I have some funds to invest, I’d buy BBGI Infrastructure (LSE: BBGI) shares for my own ISA.

As the name alludes to, BBGI is an investment company listed on the FTSE 250 that invests in infrastructure projects around the world. It covers territories such as Europe, North America, and Australia. The type of infrastructure includes essential services such as roads, hospitals, and schools.

The shares have meandered up and down in the past 12 months, which is a result of higher interest rates, inflation, and overall economic turbulence. They’re pretty much where they started, from 133p at this time last year, to 132p at present.

This leads me nicely to my bearish view of the business, and issues that could dent earnings and returns. Unfortunately, economic issues and higher interest rates and inflation can lead to a cut in spending, especially on large infrastructure projects. BBGI could find earrings and returns dented by the current malaise we find ourselves in.

Moving to the other side of the coin, BBGI possesses defensive attributes, in my view. This is due to the essential nature of the projects it invests in, plus the fact they’re government-backed. This can add a layer of security to the project overall.

From a fundamental view, a dividend yield of 6.2% is extremely attractive. For context, the FTSE 100 average is 3.6%. However, I do understand that dividends are never guaranteed. Furthermore, the shares are currently trading at a 10% discount to its current net asset value, which is another feather in my investment case’s cap.

Overall, BBGI has a good presence, solid fundamentals, and potentially lucrative business model for years to come. This could help the dividends flowing, and helping me boost my ISA and build wealth.

The post 1 under the radar stock I’d buy for my Stocks and Shares ISA appeared first on The Motley Fool UK.

With this in mind, here are two shares that I’ve added to my portfolio in the past few days.

FTSE 250 dividend stock

First up is BBGI Global Infrastructure (LSE: BBGI). This is a FTSE 250 investment company that focuses on owning and managing infrastructure projects through public-private partnerships.

Its portfolio is made of up 56 assets, including roads, hospitals, and schools across Europe, North America, and Australia. From these, BBGI generates stable income via long-term, government-backed contracts.

For this year, the dividend is 8.4p per share, which is 6% higher than last year. The forward yield is 6.2%, which is comfortably above the FTSE 250 average.

While no dividend is bullet-proof, I’d say this one is very much on the safer side of things.

Moreover, I reckon the share price, which is down 22% over the past two years, could bounce back strongly as interest rates fall and infrastructure projects start to pick back up.

That’s not guaranteed, mind you. A resurgence of inflation could quickly put the handbrake on falling interest rates while negatively impacting the trust’s portfolio value.

However, right now, the trust is trading at a 10% discount to the value of its underlying assets. That’s against a five-year average premium of 12.8%.

With a well-supported 6%+ yield, I like the risk-reward ratio here.

US growth stock

Next, I invested in a very different stock: Uber Technologies (NYSE: UBER). The share price has risen 22% so far in 2024, but I think it could rise much higher over the next decade.

The reason is that the ride-hailing and food delivery firm is quickly becoming a cash machine. From negative cash flow in 2021, the company’s free cash flow is expected to approach $10bn in 2026.

Talk about scaling up!

This is being driven by efficiency savings and ongoing global adoption of the Uber app, which is displacing local taxi firms at a rapid clip.

In Q2, gross bookings grew 21% year on year at constant currency. For Q3, management sees gross bookings of $40.2bn-$41.7bn, representing 18%-23% growth on a constant currency basis.

CEO Dara Khosrowshahi commented: “Uber’s growth engine continues to hum, delivering our sixth consecutive quarter of trip growth above 20%, alongside record profitability…more people are using the platform, and more frequently, than ever before.”

For the full year, Wall Street is forecasting revenue growth of at least 16%. I find that very impressive given how weak consumer spending is worldwide today.

Now, I appreciate that I’m taking on regulatory risk with Uber, particularly relating to whether drivers are classed as independent contractors or employees. There might even be bans in some countries.

However, the stock is trading on a price-to-sales multiple of 3.8. It’s been much higher than this in previous years.

Looking ahead, I think the likelihood of ongoing double-digit revenue growth and surging profitability make this a top tech stock.

The post 2 shares I’ve just bought for income and growth in my Stocks and Shares ISA appeared first on The Motley Fool UK.

One of my favourites from the latter is BBGI Global Infrastructure (LSE: BBGI). Here’s why I recently bought a few more shares of this investment trust.

Stable income streams

BBGI specialises in social infrastructure projects through long-term public-private partnership and private finance initiative contracts. It has 56 portfolio assets, including motorways, bridges, hospitals, and schools.

These provide government-backed, inflation-linked income streams. Its partners are creditworthy public sector entities in countries with solid credit ratings (AA to AAA), such as Australia, Canada, Germany, the Netherlands, Norway, the UK, and US.

While I like this geographic diversification, these are locations where interest rates are high. And this has been a headwind for BBGI as infrastructure investments and valuations are sensitive to rate changes.

Also, higher rates reduce the attractiveness of its dividend yield relative to other investments. While I expect these challenges to ease as interest rates fall, they’re worth bearing in mind. Inflation could always return.

Covered dividend

At the end of June, there was no structural gearing at group level and no cash drawings on a revolving credit facility. The trust had net cash of £20.6m.

It reaffirmed its 6% dividend growth target for FY24, with a further 2% growth planned for FY25. And it expects its cash flow to be 1.3 to 1.4 times this year’s payout. So the dividend looks secure.

Over the medium term, we expect cashflows to continue to support a healthy dividend cover and provide ample headroom to sustain a progressive dividend policy well into the future.

Non-executive chair Sarah Whitney, H1 2024 earnings report

Earning passive income

At 136p, the current share price offers an attractive forward dividend yield of 6.2%.

This means a £19,434 investment in my ISA would get me around 14,290 shares, enough to pay the equivalent of £100 a month in tax-free passive income.

Moreover, the shares are trading at a 10% discount to net asset value. This compares to a five-year average premium of about 12%. I think this stock could be a steal for long-term investors like myself.

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.

Foolish takeaway

High levels of public debt combined with rising populations and the growing need for new infrastructure projects means specialist investors like BBGI are well-positioned to succeed.

Deglobalisation is a megatrend that will require the onshoring of US manufacturing and an increased focus on energy security, driving significant demand for private infrastructure investments.

Meanwhile, the EU is aiming for Europe to become the first climate-neutral continent. The trust says this presents “a continuous flow of pipeline opportunities in the core infrastructure space“.

Finally, the Australian government is committed to investing A$120bn on projects over 10 years.

Even without further acquisitions though, management says the portfolio could continue to generate a rising dividend for the next 15 years.

While no payout is ever truly guaranteed, I’d be very surprised if this one was scrapped. I’d happily buy more shares with spare cash for a diversified portfolio.

The post I’d buy 14,290 shares of this UK dividend stock for £100 a month in passive income appeared first on The Motley Fool UK.

This quote emphasises the importance of long-term investing, especially for those without a large starting sum or savings well into adulthood. To build wealth, we need to adopt a mindset focused on decades.

In other words, we will need to regularly invest and be patient. The good news is that this is possible and can lead to a sizeable passive income stream down the road.

Harness the power of compound interest

When it comes to building wealth, compounding is an investor’s best friend. Indeed, Buffett himself admitted that: “My life has been a product of compound interest.”

Specifically, the ‘Oracle of Omaha’ has consistently reinvested the profits from his investments back into the market. This strategy has allowed his capital to keep growing. The longer he holds onto his winning investments, the more they compound, significantly increasing in value.

Indeed, the effect has been so powerful that around 90% of his $135bn fortune was accumulated after the age of 60 (he’s now 93).

To use a more mundane example, if I invest £5,000 in an income stock with a juicy 7% dividend yield, I can expect to earn £350 annually, assuming the payout isn’t cut (which is always possible).

While nothing to grumble about, it’s not really a mouthwatering sum. However, if I reinvest my dividends back into buying more shares at the same average price, that £3,500 becomes £38,061 after 30 years.

High-quality stock

I’ve chosen this reinvestment strategy with my shares in BBGI Global Infrastructure (LSE: BBGI).

This is a FTSE 250 infrastructure investment company that manages a portfolio of 56 assets across the UK, Europe, North America, and Australia. These include schools, hospitals, toll bridges, motorways, and army barracks.

BBGI earns income from public authorities based on the availability and performance of these assets rather than their usage. This provides the company with predictable cash flows, which in turn has supported consistent and rising dividends.

The stock is expected to pay a dividend of 8.4p per share for FY24. At today’s share price of 135p, that translates into an attractive forward yield of 6.2%.

Now, I should mention that the yield is at a historic high due to the high interest rate environment. This has negatively impacted the value of the firm’s assets and also made building out its portfolio much more challenging. There’s a risk these conditions could persist for some time or even worsen.

Reassuringly though, BBGI says its current portfolio of assets could support rising dividends for another 15 years. That’s music to my ears.

A mighty portfolio

Let’s assume I start from scratch and invest £750 every month into quality stocks like BBGI. Assuming I generate a long-term average return of 8.5% (with dividends reinvested), this is what would happen.

My portfolio would grow to an incredible £1.16m in 30 years (excluding any platform fees)!

If my shares were by this point yielding an average of 7% in dividends, I could be earning £81,303 a year in passive income.

In my view, turning £750 a month into this would be equivalent to building a passive income empire.

The post No savings at 35? I’d follow Warren Buffett and aim to build a passive income empire appeared first on The Motley Fool UK.

If I were fortunate to have £20k sitting in an ISA today, I’d consider these three quality stocks. They’re very different from each other, thereby offering the necessary diversification.

FTSE 250 income

Many investors love dividends and I’m no different. BBGI Global Infrastructure (LSE: BBGI) is a FTSE 250 dividend stock that I recently bought.

There are a number of things I like about this infrastructure fund. First off, there is a 6% dividend yield, which is forecast to rise to 6.6% by 2025. That’s far higher than the average mid-cap stock.

Second, I’m reassured by the nature of BBGI’s 56-asset portfolio. It includes schools, hospitals, prisons and motorways. The contracts are availability-based, which means BBGI receives income from public authorities based on the availability and performance of the asset, rather than how much it’s used.

While no dividend is guaranteed, this should make the income far more stable than most.

One risk, though, is the high interest rate environment, which could continue weighing on the share price. Higher rates push up borrowing costs and limit the growth of public-private infrastructure projects.

Despite this, BBGI says the projected cash flows from its existing portfolio are enough to grow the dividend for another 15 years.

FTSE 100 high-flyer

The second stock I’d consider is AstraZeneca (LSE: AZN). Shares of the FTSE 100 pharma heavyweight have hit record highs recently.

However, I think the stock could keep rising. In its recent investor day, the firm unveiled an ambitious target to reach $80bn in sales by 2030, up from $45.8bn last year.

To achieve this, it expects to launch 20 new medicines as well as increase sales from its existing portfolio, which is heavily focused on oncology, biopharmaceuticals, and rare diseases.

Of course, successful drug development is notoriously difficult, and a couple of failures in late-stage clinical trials for the next potential blockbusters could send the share price on a downwards spiral.

That said, the firm spent around 23% of its total revenue last year on research and development. So AstraZeneca’s massive pipeline is constantly expanding.

Despite its vast size and £195bn market cap today, the company remains extremely innovative and hungry for growth. This bodes well for shareholders.

Growth powerhouse

Finally, I’d inject a bit of zip into my ISA with MercadoLibre (NASDAQ: MELI). This company has built Latin America’s leading e-commerce marketplace and payments app.

Growth has been strong for years but looks set to continue, with around 70% of Latin America’s 670m population lacking access to either a bank account or lending services. The firm’s digital wallet (Mercado Pago) acts as a gateway to the financial system for many of these individuals.

One risk to note here is that Latin America’s economies and currencies can be very volatile. Inflation has been very high in Argentina recently. Such things have the potential to negatively impact the company’s earnings.

Nevertheless, analysts still expect MercadoLibre’s revenue to double from $19bn in 2024 to over $39bn by 2028, as e-commerce takes off across the region.

So, I’d consider snapping up the stock today, especially as it currently sits 20% below its peak.

The post My top 3 picks today for a £20,000 Stocks and Shares ISA appeared first on The Motley Fool UK.

I say ‘could’ because no dividend is set in stone. They can get reduced or axed altogether.

To mitigate this risk, I hold a basket of income stocks in my ISA. Here are two of them that I like right now.

British American Tobacco

First up, I find the forward yield of British American Tobacco (LSE: BATS) very attractive. At the current share price of 2,389p, it sits at a hefty 10.1%. It rises to 10.6% in 2025, if forecasts prove correct.

Of course, the yield isn’t that high for nothing. Smoking volumes are in decline, while the firm’s new category products like vaping and oral tobacco might never be as profitable as cigarettes.

Also, the FTSE 100 company has sizeable debt and has admitted that its cigarette brands (including Lucky Strike and Dunhill) will be worthless in the US within three decades’ time. In December, it took a $31.5bn non-cash impairment on the value of these brands.

Despite this, I think the potential rewards outweigh the risks. The stock is trading on a price-to-earnings (P/E) ratio of just 6.2. That’s incredibly cheap for a company still expected to grow its underlying operating profit in the mid-single-digits by 2026.

It’s buying back a big chunk of its own shares and management remains committed to a progressive dividend policy. Meanwhile, net debt has been reduced from £44.2bn in 2018 to less than £34bn last year.

And while vaping is coming under regulatory scrutiny, I don’t expect it to be banned. That’s because vaping is at least 95% less harmful than smoking, according to Public Health England.

Cigarette volumes have been declining for decades, yet British American Tobacco is still generating substantial profits. I don’t see that changing soon enough to threaten the dividend.

BBGI Global Infrastructure

Next, we have BBGI Global Infrastructure (LSE: BBGI). This is a FTSE 250 company dedicated to social infrastructure investments. These include toll bridges, schools, hospitals, motorways and army barracks.

These projects often have long-term contracts that are government-backed. Additionally, many contracts include inflation-linked adjustments, providing BBGI with a predictable and stable income stream.

For investors, this translates into a nice 6.5% forward dividend yield.

Meanwhile, the firm estimates that the projected cash flows from its existing 56-asset portfolio are enough to sustain a growing dividend for the next 15 years!

So, what’s the catch?

Well, higher interest rates are a headwind here. They make financing new projects costlier, limiting the portfolio’s growth potential.

Plus, the fund suffered a 1.4% decline in net asset value (NAV) due to higher rates last year.

Nevertheless, the dividend looks rock-solid to me. And for patient investors, there may be some decent share price gains too. That’s because BBGI is trading at a 12% discount to NAV, which is historically rare.

In March, the firm said: “As governments continue to run deficits and demand for maintaining,
repairing, and constructing new infrastructure grows, there is an increasing need for private sector investment in infrastructure, presenting long-term opportunities for BBGI.”

Looking ahead, I’m very optimistic about the prospects for this dividend stock.

The post 6%-10% yields! 2 UK shares I’d buy in June to target years of passive income appeared first on The Motley Fool UK.