London’s stock market is a great place to consider going shopping for dividend shares. A strong culture of dividend distribution means it’s packed with top high-yield shares and companies with strong records of sustained payout growth.
With this in mind, here are two great passive income stocks to consider today:
| Dividend share | Predicted dividend growth this year | Dividend yield |
|---|---|---|
| Ramsdens (LSE:RFX) | 4% | 5.2% |
| Primary Health Properties (LSE:PHP) | 2% | 7.3% |
As you can see, the forward dividend yield on each of these shares comfortably beats the FTSE 100 average of 3.6%. Here’s why I think they could prove great ways to make a second income over the long term.
Should you invest £1,000 in Primary Health Properties right now?
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Ramsdens
Pawnbrokers like Ramsdens can see revenues sink during periods of economic strength. But a murky outlook for Britain’s economy suggests businesses like this could continue to thrive.
Revenues and pre-tax profits here soared 14% and 12%, respectively, in the 12 months to September 2024. The top and bottom lines were also boosted by the strong rise in gold prices that has continued in recent weeks.
This encouraged the company to raise the the total dividend in fiscal 2024 by 8% year on year.
Admittedly Ramsden’s history has been lumpy so far this decade, with payouts disrupted by the Covid-19 emergency. But they’ve been rising steadily since financial 2021, and I think the company looks in good shape to meet this year’s predicted cash rewards.
The forecast dividend is covered 2.3 times by expected earnings, providing a healthy margin for error. The company also benefits from a strong balance sheet, with net cash standing at £7.4m as of September.
Primary Health Properties
Real estate investment trusts (REITs) are required to pay out at least nine-tenths of profits from their rental operations in dividends each year. While this provides some peace of mind for investors, it doesn’t guarantee a large or growing dividend over time, as payouts are still sensitive to core performance.
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In this regard, Primary Health Properties is (in my opinion) one of the most secure REITs for dividend income. Indeed, annual payouts have risen every year for more than a quarter of a century.
This stability is thanks to the firm’s focus on the ultra-defensive healthcare market. Unlike REITs that operate in cyclical sectors, demand for the properties it lets out (like GP surgeries) remain unaffected by the broader economic landscape.
This isn’t to say that trading conditions will remain supportive looking ahead. For instance, changes to NHS budgets could impact future rents. But NHS reform that’s putting greater focus on good primary healthcare provides me with some reassurance.
I’m also confident earnings and dividends will rise as our ageing population drives demand for healthcare services.
In the meantime, a strong balance sheet provides solid foundations for Primary Health to keep raising dividends over the near term. The firm’s loan-to-value (LTV) of 48.1% in December remained comfortably within its target range of 40-50%.
