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

I really like SSE plc (LON: SSE) and Persimmon plc (LON: PSN) as passive income generators.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »