The FTSE 100‘s home to a variety of popular passive income stocks. It’s jam-packed with businesses that have multiple revenue streams, market leading positions, and strong balance sheets. These qualities in turn give them the ability to pay a decent and typically growing dividend.
But the outlook for many popular income shares is becoming cloudier. Shell’s long-term dividend record, for instance, is under threat as renewable energy steadily takes over. For Lloyds, the rise of challenger banks and structural problems for the UK economy pose colossal problems going forward.
2 top dividend stocks
Yet there are plenty of other top stocks for investors to consider today. Take Legal & General Group (LSE:LGEN) and Bunzl (LSE:BNZL), for instance. I think they could deliver exceptional long-term returns through a combination of dividend income and share price gains.
It’s never a good idea to buy just one or two shares. A lack of diversification significantly increases risk for investors. But if I were to go ‘all in’ and spend all of my cash on just a couple of Footsie shares, I would choose these two. Here’s why.
Generally brilliant
Legal & General’s share price has struggled for traction in recent years. But I expect it to pick up steam looking ahead, thanks to favourable demographic factors.
In the UK, the number of people aged 75 and over is tipped to double between now and 2039, to 10m. The rapid growth in elderly populations is a phenomena being witnessed across the globe.
This has the potential to drive profits at Legal & General steadily higher. It will have to paddle hard to thrive in a fiercely competitive marketplace. But demand for its retirement, wealth and protection products could still take off as people get older.
I like Legal & General as a passive income stock because of its stunning cash generation. This has laid the bedrock for long-running dividend growth, as shown in the chart below, and for market-beating yields.
Chart created with TradingView
Dividends are never guaranteed. But City analysts expect dividends to continue rising for the foreseeable future. This results in huge yields of 9.1% and 9.6% for 2024 and 2025 respectively.
Stunning dividend growth
Bunzl’s another FTSE stock with a stunning record of dividend growth. Annual payouts have risen for 31 straight years, including by 8.9% last time out in 2023.
This reflects the essential role its products play in everyday society. Its wide range of goods — from food packaging and medical gloves to cleaning products — are in high demand, regardless of economic conditions.
As a consequence, Bunzl’s predictable cash flows and excellent earnings visibility, and thus the means to reliably raise dividends. This enables investors like me to reduce the impact of rising inflation on our returns.
On the downside, the company’s acquisition-led growth strategy leaves it open to nasty surprises. Unexpected costs, for instance, can have a large impact on earnings.
But fortunately, Bunzl has an excellent history of identifying acquisitions and integrating them into the wider group. It’s why the business is one of the most dependable profit growers out there.
Like Legal & General, this is a share I’d happily invest a large chunk of cash into at the next opportunity.
The post 2 FTSE 100 passive income stocks I’d feel confident going ‘all in’ on appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p 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 10%, 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
More reading
With an 8.6% yield, can the Legal & General dividend last?
2 UK shares I’d sell in May… if I owned them
My two favourite FTSE passive income stocks have plunged in 2024. Time to buy more?
How I’d invest £200 a month in UK shares to target £9,800 in passive income annually
8.6% or 7.2%? Does the Legal & General or Aviva dividend look better?
Royston Wild has positions in Legal & General Group Plc. The Motley Fool UK has recommended Bunzl Plc and Lloyds Banking Group Plc. 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.
