I’d buy 11,907 shares of this FTSE 250 stock to lock in £1,000 a year in passive income

The UK stock market is jam-packed with shares that pay attractive dividends. Here’s one I’d snap up now to start generating passive income.

| 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.

Elevated view over city of London skyline

Image source: Getty Images

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.

When it comes to dividend stocks paying out passive income, I tend to believe that boring is better. That is, I don’t want some exciting tech firm whose business model is ultimately built on sand.

I’m after an established company that operates in a permanent sector. And I want to see a solid track record of rising dividends. So, boringly dependable, basically.

Here, I’ll highlight a FTSE 250 stock that ticks all my boxes.

Should you invest £1,000 in Vanguard Funds Public Limited Company - Vanguard Ftse All-world Ucits Etf right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Vanguard Funds Public Limited Company - Vanguard Ftse All-world Ucits Etf made the list?

See the 6 stocks

Low-risk dividends

BBGI Global Infrastructure (LSE: BBGI) is an investment company with 56 infrastructure assets in the UK, North America, Australia, and continental Europe.

First off, I like this global diversity, with the portfolio spread across developed countries with credit ratings between AA and AAA.

Geographic split
Canada35%
UK33%
Continental Europe13%
US10%
Australia9%

I also like the nature of these assets. We’re talking about motorways and bridges, schools, hospitals, police and fire stations, colleges, and more. Basically, things that are unlikely to disappear overnight.

In the UK, this includes Gloucester Royal Hospital, the M1 Westlink, and the M80 motorway in Scotland’s central belt.

Moreover, this is public sector-backed contracted revenue, resulting in predictable long-term cash flows that have inflation linkage.

No dividend is ever totally safe, but this comes close, in my opinion. It has a consistent payout record stretching back to 2011.

Source: BBGI 2023 annual report

So why on earth has the share price fallen 25% in three years?

Created with Highcharts 11.4.3Bbgi Global Infrastructure PriceZoom1M3M6MYTD1Y5Y10YALL5 Apr 20195 Apr 2024Zoom ▾Jul '19Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '242020202020212021202220222023202320242024www.fool.co.uk

Risks in perspective

The culprit has been higher interest rates. This has made other assets more attractive than shares, which carry slightly higher risk (and reward).

So one challenge here would be a return of inflation and a higher-for-longer rate environment. That could further dampen investor sentiment towards the shares.

Additionally, refinancing existing debt at higher rates can negatively impact cash flows due to the increased costs. However, 55 of its 56 assets have no refinancing risk.

Plus, BBGI now has no debt on the trust level after it fully repaid a revolving credit facility that it used in 2022 to fund two investments.

Those repayments were made entirely from surplus cash flows last year. This signals that it can continue to grow organically without needing to access equity markets for funding.

Indeed, BBGI estimates that even without further acquisitions, the portfolio could continue to generate a rising dividend for the next 15 years.

Last year, its dividend was covered 1.4 times by cash flows.

A grand a year in passive income

Speaking of the dividend, this increased 6% last year to 7.9p per share. And the firm has signalled its intent to raise this another 6% in 2024 (to 8.4p).

This gives the stock an attractive forward dividend yield of 6.46%.

At today’s share price of 130p, this means I’d need approximately 11,907 shares to generate £1,000 a year in passive income for this financial year. They would cost me around £15,480.

Now, that’s way more than I intend to initially invest in this dividend stock. But I plan to continue buying shares over time, especially while they’re trading at a 10% discount to net asset value (NAV).

Whenever the stock pays me dividends, I plan to reinvest them and generate higher passive income down the road.

Should you buy Vanguard Funds Public Limited Company - Vanguard Ftse All-world Ucits Etf now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Ben McPoland 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

Investing Articles

Could the S&P 500 be heading for an almighty crash?

Christopher Ruane shares his take on why he thinks the S&P 500 could be heading for a big fall at…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Down 64%, this FTSE 250 stock offers a 13% dividend yield for investors

This struggling investment banker has suffered significant losses in the past five years, but it has the second-highest yield on…

Read more »

Investing Articles

1 stock market ETF I’ve been buying during the sell-off

The stock market's been all over the place in April, creating a fertile breeding ground for long-term buying opportunities.

Read more »

Investing Articles

As the Sainsbury share price bucks the price-war trend on FY results, I examine the dividend prospects

The J Sainsbury share price has been regaining ground, despite growing fears of intense competition in the supermarket sector.

Read more »

The words "what's your plan for retirement" written on chalkboard on pavement somewhere in London
Investing Articles

Should I invest in a Stocks and Shares ISA or a SIPP to retire early?

Early retirement is the ultimate goal for many investors, but choosing between a Stocks and Shares ISA and a pension…

Read more »

Investing Articles

Is now a great time to consider buying Greggs shares?

Greggs shares have been hammered in 2025. But have they now fallen too far? Paul Summers takes another look at…

Read more »

Investing Articles

Is it still a great time to buy cheap shares as stock market crash fears recede?

Fear of a stock market crash can trigger panic selling... but that surely can't be the best thing to do…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

The Vodafone share price is 24% undervalued, according to analysts

Our writer’s been looking at the latest targets for the Vodafone share price. Although there’s a wide variation, the average…

Read more »