Investing in dividend stocks can be a great way of earning passive income. And the power of compound interest means the sooner someone gets started, the more they can earn over time.
With that in mind, I have three dividend stocks on my list to buy this month. Right now, I think rising interest rates are creating opportunities in various different industries and geographies.
Admiral
From the FTSE 100, I’m seriously considering buying shares in Admiral (LSE:ADM). The stock is actually up 10% since the start of the year, but I still think there’s a buying opportunity here.
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Car insurance is a difficult business to be in – over the last decade or so, the industry as a whole hasn’t done much better than break even with its underwriting. By contrast, Admiral has been consistently profitable.
I think this indicates that the company’s technological advancements are giving it a meaningful edge over its competitors. And this puts it in a very strong position going forward in an industry people need.
Inflation is a risk here. But with interest rates rising, the company should be able to earn a better return on its investments to offset rising costs, which is why I think the outlook for the business is good.
Primary Health Properties
I’m also looking to add to my stake in FTSE 250 real estate investment trust Primary Health Properties (LSE:PHP). The company leases doctor surgeries and health centres to (in most cases) the NHS.
The company enjoys high occupancy levels and the probability of unpaid rent seems minimal with 89% of its income coming from government agencies. The main risk to consider is the issue of rising interest rates.
This isn’t a good thing for a company with substantial debt and a lot of buildings. But there’s still some way to go before the business gets into any serious danger from either covenant breaches or rising interest payments.
Overall, I see this as a steady source of passive income going forward. And buying it at a price it was trading at in 2015 seems like a great opportunity to me.
Kraft Heinz
Lastly, US food company Kraft Heinz (NASDAQ:KHC) is on my list of stocks to buy. With the share price down 18% since the start of the year, the dividend yield is now just under 5%.
I think the business has two especially attractive factors. It is in a sector that is resistant to economic downturns and its brands and scale give it a significant advantage over its competitors.
Looking ahead, there’s a risk persistent inflation might put pressure on margins by increasing costs. But in the US – where most of the company’s revenues come from – inflation has been coming down fairly well.
Over the last five years, the business has been improving its financial position by reducing its debt. As a result, I expect the company to be it in a much better position to return cash to shareholders going forward.
