I’m searching for the best FTSE 100 stocks to buy for long-term passive income. Here are two on my watchlist right now.
Improving momentum
Rising interest rates and the increasing cost of living both pose a threat to housebuilders like The Berkeley Group (LSE: BKG).
But despite these pressures the industry has so far remained extremely robust. In fact, home values keep growing by double-digit percentages. According to Halifax, the average UK property price rose 11.5% on an annual basis in August.
Pleasingly for Berkeley too, the market is rapidly improving in London. This is good for the business as it concentrates on home construction in the capital and South East.
The average home price in London hit a new record of £554,718 last month, Halifax said. This was up 8.8% on an annual basis and was the fastest rate of growth since 2016.
6.4% dividend yield
Persistent share price weakness means that Berkeley currently commands a forward P/E ratio of just 8.6 times. This is extremely low, in my opinion, given the ongoing resilience of the market.
The company itself claimed last week that it remains on course to meet profit forecasts for the current financial year to April 2023. It noted that “[a] good level of demand continues to support pricing above business plan levels” and that prices remain “sufficient” to cover increased costs on a business-wide basis.
City analysts believe Berkeley will pay a full-year dividend of 212.4p per share this year. And they think the builder will hike the full-year payout to 221.5p in financial 2024.
As a consequence the firm’s dividend yields clock in at 6.1% and 6.4% for this year and next respectively.
A dividend growth hero
Associated British Foods (LSE: ABF) is another FTSE 100 stock I’d buy for passive income. The food and clothing business raised annual dividends at a compound annual growth rate of 8% in the decade up to the pandemic. And while the company faces some near-term trouble as product costs soar, I expect ABF to deliver stunning earnings and dividend growth over the long haul.
I like this stock because of the enormous potential of its Primark low-cost clothing/lifestyle division. Demand for its cut-price apparel is surging as consumers demand more bang for their buck. And rapid expansion here has the potential to supercharge profits for ABF.
Primark will enter its 15th market later this year when it opens a store in the Romanian capital of Bucharest. The business has also recently launched ‘Click & Collect’ operations to latch onto the e-commerce boom.
As for dividends, City analysts expect a payout of 45.3p per share and 47.6p for the financial years to September 2022 and 2023 respectively. These projections create chunky yields of 3.4% and 3.5%.
Recent share price falls also leave ABF trading on a forward P/E ratio of just 10 times. In my opinion this makes the firm a top dividend-paying value stock to buy.
