It’s easy to see why Lloyds (LSE:LLOY) shares are so popular with dividend investors. Its 6% dividend yield for 2024 soars past the 3.7% average for the broader FTSE 100.
And the yield rises to an even-better 6.6% for 2025.
A robust balance sheet means the bank looks in good shape to meet these forecasts, too. But this isn’t enough to encourage me to invest. I’m also seeking shares that could deliver solid capital gains. And as the UK economy struggles and market competition heats up, I fear Lloyds’ share price could struggle for traction.
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There are many other passive income stocks I think investors should consider today. Here are just a couple.
Banco Santander
Just like Lloyds, Banco Santander (LSE:BNC) faces the same twin dangers of mounting competition and macroeconomic pressures on its profits.
But one big thing sets this company apart. That’s its exposure to emerging Latin American markets that could deliver long-term growth.
Santander sources 25% of profits from South America, where it’s a leading industry player in regional powerhouses such as Brazil, Argentina and Chile. It also has a significant presence in the rapidly expanding Mexican economy.
While personal income levels have been growing rapidly in these territories, banking product penetration’s still low. So Santander — whose revenues jumped 13% in 2023 — has considerable scope to continue increasing sales and earnings.
Like Lloyds, Santander has a rock-solid balance sheet that it’s boosting through successful cost-cutting measures. This helped it return €5.5bn to shareholders through dividends, cash and share buybacks last year. Encouragingly for income investors, the bank has vowed to hike this amount to a new record of €6bn in 2024 too.
This supports an above-average 4.1% dividend yield for 2024, a figure that rises to 4.4% for 2025. Short-term yields may not be on the same level as Lloyds but, on balance, I think it’s a far more attractive stock.
TBC Bank Group
TBC Bank Group (LSE:TBCG) is another retail bank with considerable share price and income potential. Like Santander, it’s also focused on customers in developing markets, in this case Georgia and Uzbekistan.
Total income here rose 15% in 2023 as demand for its loans, and both current and savings accounts, continued to grow. Over the course of last year the number of customers in its core Georgian market rose 10%. In Uzbekistan, where it entered in 2020, saw customer numbers leap 48%.
TBC is making the most of low product penetration and rapid GDP growth in these countries. It’s also investing heavily in digital banking, a strategy that’s proving highly effective in attracting customers.
One drawback of owning the bank’s stock is the close proximity of its operations to Russia. This could be detrimental to its share price if concerns about the geopolitical stability of the region grow.
Yet I still think it’s an attractive passive income stock to consider today. Its 7.2% dividend yield for this year moves to 8.3% for 2025.
