I’m searching the FTSE 100 and FTSE 250 for the best stocks to buy for passive income next year.
2024 could be another tough year for the global economy as inflationary pressures linger and China’s economy cools. So here I’m looking for companies with strong balance sheets and highly defensive operations.
Based on current dividend forecasts, £10,000 invested equally in these UK shares could make me a second income of £787 in 2024. Here’s why I’m looking to buy them for my own portfolio at the next opportunity.
Passive income stocks: our picks
Do you like the idea of dividend income?
The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?
If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…
Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.
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Bluefield Solar Income Fund Limited
Energy demand remains broadly constant at all points of the economic cycle. So purchasing shares in an energy producer or power grid specialist could be a good idea in the current climate.
Bluefield Solar Income (LSE:BSIF) is one such company on my radar. This FTSE 250 stock, which has invested in approximately 200 solar farms across the UK, has a stable flow of income that it can use to finance large dividends every year.
City analysts are expecting the fund to pay another 8.6p per share reward in this financial year (to June 2024). This results in a gigantic 7.5% dividend yield.
Of course, forecasts don’t always turn out to be correct. And adverse weather conditions are a constant threat to renewable energy stocks. But I’m still expecting dividends here to steadily increase along with demand for clean energy.
Target Healthcare REIT
Care home owners like Target Healthcare REIT (LSE:THRL) are having to navigate the problem of nursing shortages. But strong tenant demand — driven by the UK’s rapidly growing elderly population — mean trading should remain stable over the near term.
For this financial year (to June 2024), the FTSE 250 firm offers a 7.2% dividend yield.
There are several reasons why I think Target is a solid dividend stock for 2024. Its asset portfolio of nearly 100 properties is let out to 32 different companies. This ensures that difficulties with one or two tenants doesn’t significantly impact profits at group levels.
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Finally, Target’s occupants are also tied down on long-term tenancy agreements. The weighted average unexpired lease term (or WAULT) stood at an impressive 26.3 years as of June. This is one of the highest readings among the UK’s real estate investment trust (REIT) sector.
Legal & General Group
Financial services giant Legal & General (LSE:LGEN) is also tipped to continue paying big dividends by City analysts. Its yield for 2024 sits at a FTSE 100-busting 8.9%
Revenues here could stagnate if the global economy remains weak. But a strong balance sheet means it should still remain an impressive passive income stock. As a shareholder myself, I’m soothed by the company’s cash-rich balance sheet.
Legal & General’s Solvency II capital ratio actually rose to 230% as of June. There’s also a possibility that the firm could launch a share buyback programme in the near future to return more of its excess cash.
This is a share I plan to hold for the long term. Demographic trends mean profits and dividends here should rise steadily during the next decade.
