The London stock market has been underperforming for years. But it’s not all bad news. After all, investors today can now pick up some top passive income stocks at rock-bottom prices.
Two of my favourite dividend shares are shown in the table below. As you can see, each trades on a super-low price-to-earnings (P/E) ratio and carries a gigantic dividend yield.
| Stock | Forward P/E ratio | Forward dividend yield |
|---|---|---|
| Impact Healthcare REIT (LSE:IHR) | 7.7 times | 8.3% |
| Greencoat Renewables (LSE:GRP) | 9.7 times | 7.9% |
If broker projections are accurate, I have a great chance of supercharging my dividend income over the next 12 months.
Should you invest £1,000 in Care Reit right now?
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More accurately, a £20,000 lump sum invested equally across these stocks would give me a £1,620 passive income during the period. This is based on an average dividend yield of 8.1%.
I’m confident that these UK shares will steadily grow dividends over the long term, too. Here’s why I’d buy them for my own portfolio if I had spare cash to invest.
Cheap REIT
High interest rates are an ongoing threat to real estate stocks. They depress the net asset values (NAVs) of these companies’ property portfolios and push up borrowing costs.
But the stunning all-round value of Impact Healthcare REIT suggests now could be a great time to buy. Not only does it trade on those rock-bottom P/E ratios and carry that 8%+ dividend yield. At 85.1p per share, Impact also trades at a near-27% discount to its estimated NAV per share of 116p.
As a major care home provider, it looks in good shape to capitalise on the UK’s growing elderly population. And REIT rules mean it could be an especially good pick for future passive income.
In exchange for certain tax breaks, these shares must pay at least 90% of their annual rental profits out by way of dividends.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Green dividend machine
Investing in renewable energy stocks could also deliver the holy grail of healthy capital appreciation and dividend income. Demand for clean energy is growing sharply as legislators take steps to wean their countries off fossil fuels.
I think Greencoat Renewables could be a great share to help me exploit this opportunity. The business owns onshore and offshore wind farm assets all across Europe, from which it sells power to electricity companies.
On the downside, its ability to generate power can be significantly compromised during calm weather periods.
But on the other hand, the stable nature of energy demand means its earnings aren’t affected by broader economic conditions, unlike most other UK shares. This in turn can make it a dependable dividend payer year after year.
What’s more, Greencoat’s wide geographic footprint helps reduce the threat of adverse weather patterns at group level. The bulk of its assets are in Ireland. However, its wind farms are also in France, Spain, Sweden, and Finland.
Over the long term, I think this could prove a hugely lucrative stock to own in my portfolio.
