With an average 10.2% dividend yield, here are 2 dividend shares to consider for an ISA passive income of £1,530!

Stocks and Shares ISA investors may be able to generate a four-figure annual income by considering these UK dividend shares. Read on.

| More on:

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.

The FTSE 100‘s packed with a huge range of cash-rich, market-leading companies boasting great dividend records. But I’m not impressed by the index’s average forward dividend yield of 3.5%. ISA investors can get much better yields today.

Take the following UK dividend stocks, for instance. Their forward dividend yields come to an average 10.2%.

Dividend shareDividend yield
Alternative Income REIT (LSE:AIRE)9.2%
Global X Nasdaq 100 Covered Call ETF (LSE:QYLD)11.1%

It’s important to remember that dividend projections can often miss their targets. As we saw during the pandemic, even the most financially robust company can slash, suspend, or cancel shareholder payouts when crises come along.

Should you invest £1,000 in Alternative Income Reit Plc 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 Alternative Income Reit Plc made the list?

See the 6 stocks

However, if broker forecasts are correct, a £15,000 lump sum invested equally across these stocks could provide Stocks and Shares ISA investors with a £1,530 passive income this year alone.

Here’s why I think they’re worth serious consideration today.

A favourite fund

Exchange-traded funds (ETFs) can provide terrific returns while also helping investors effectively manage risk. In the case of the Global X Nasdaq 100 Covered Call ETF, individuals spread their cash across a wide range of the largest US tech companies.

The fund generates income by purchasing Nasdaq 100 shares and then selling covered calls on them. It then returns this cash to shareholders by way of dividends.

An added benefit is that the fund provides exposure to the so-called Magnificent Seven technology stocks (albeit with limited upside potential). Businesses like Nvidia, Microsoft and Alphabet have significant earnings opportunities to mine including quantum computing, autonomous vehicles and artificial intelligence (AI).

On a more sombre note, concerns over the disruptive impact of DeepSeek’s AI model could mean further volatility with the firm’s underlying holdings. It could also impact the premiums the fund collects from selling options, and by extension the dividends it distributes.

But on balance I think it’s still an attractive stock to consider, and especially for those with long-term investment strategies. Over extended timeframes, the impact of temporary market choppiness can be smoothed out.

Real estate star

Real estate investment trusts (REITs) can also be great investments for a passive income. These companies don’t pay corporation tax. And in return, they must pay at least 90% of rental profits out in dividends each year.

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.

This doesn’t necessarily guarantee a large and dependable dividend income however. Rent collection and site occupancy can slip during economic downturns, impacting rental earnings.

But well-diversified trusts like Alternative Income REIT can greatly reduce this risk. This particular one’s portfolio spans multiple cyclical and non-cyclical sectors including hotels, residential tower blocks, petrol stations, care homes and retail warehouses.

I also like this particular property share because its tenants are locked into extremely long contracts. As of June, its weighted average unexpired lease term (WAULT) was 16.5 years to the earlier of break and expiry.

What’s more, almost all of its tenants are locked into inflation-linked contracts, which substantially protects group earnings from rising costs. Almost 96% of its leases were linked to the retail price index (RPI) or consumer price index (CPI) as of June.

Should you buy Alternative Income Reit Plc shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy 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.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Microsoft, and Nvidia. 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.

Our best passive income stock ideas

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’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

A top-level insider at Diageo just bought £500k worth of shares

Diageo shares have tanked. But one director at the alcoholic beverages company clearly believes there’s an investment opportunity here.

Read more »

Investing Articles

Will the Aston Martin share price fall further, or is it time to buy?

How does the Aston Martin Lagonda share price look for investors, a day after 2024 full-year results pushed it down…

Read more »

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

If a 40-year-old puts £500 a month into a Stocks & Shares ISA, here’s what they could have to retire on

The tax-efficient Stocks and Shares ISA can be a powerful weapon in helping Britons to build long-term wealth, as I'll…

Read more »

Investing Articles

How do Tesla shares measure up as a GARP investment?

Tesla shares continue to plummet. So how does the automaker now look from a value perspective? Royston Wild investigates.

Read more »

Top Stocks

4 international stocks Fools have been buying!

On the hunt for inspiration for stocks to consider buying outside of Britain, to diversify your portfolio? Here's what a…

Read more »

Buffett at the BRK AGM
Investing Articles

What FTSE 100 stock might Warren Buffett think was cheap in 2025?

Warren Buffett loves undervalued stocks and here’s one our Foolish author thinks he could take a fancy to on the…

Read more »

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

Down 99%! This $1 penny share has been crushed by the artificial intelligence (AI) boom

Our writer takes a look at one penny share that has been crushed like a tin can since the release…

Read more »

Investing Articles

After an incredible Q4, this top growth stock just jumped 15% today! 

Ben McPoland digs into the fourth-quarter earnings of Axon Enterprise (NASDAQ:AXON). Is this excellent growth stock still worth considering for…

Read more »