I see buying UK-listed dividend shares as key way to create passive income. And the FTSE 100 is home to plenty of businesses willing to reward shareholders with sizeable dividend yields.

Here are two I’m watching like a hawk.

Dividend powerhouse

My first choice is Footsie stalwart Legal & General (LSE: LGEN). I already own the stock. However, following a shaky week for its share price after the release of its half-year results on 15 August, I’m tempted to top up my holdings.

The main reason for the fall was the detrimental impact that rising interest rates have had on its fund management arm and aspects of its UK insurance business. However, I deem these short-term issues and I’m more focused on the positives.

To start, the stock looks cheap. As I write, it trades on a price-to-earnings ratio of just 6. That’s over half that of the FTSE 100 average, so I see real value in Legal & General shares.

Moreover, its near-9% dividend yield is also enticing. The firm’s made a massive push in boosting shareholder returns in the past few years, including its ambitious dividend plan set to end next year. In its latest announcement, group CEO Sir Nigel Wilson said the business remained in the position to “deliver attractive returns” to shareholders.

More widely, I’m a fan of L&G due to its rich history and strong brand presence. The current issues seen in the financial sector could hamper its performance in the short run. But with its name, low valuation, and attractive income, I’d be keen to buy Legal & General shares.

A dark horse

Second on my list is banking giant Lloyds (LSE: LLOY). Similar to Legal & General, I already own the stock. However, following a 10% fall in 2023, I sense an opportunity to buy.

It’s been far from plain sailing for banking stocks in the last 12 months. Racing inflation, aggressive rate hiking, and the volatility seen across the sector, have investors spooked. But, in my opinion, there’s plenty to like about Lloyds.

For example, the stock provides investors with a yield touching 6%. While this isn’t inflation-beating, it certainly trumps my money sitting stagnant in the bank. Covered nearly three times by earnings, I’m also fairly confident that it’ll be paid out.

The Black Horse Bank recently released its half-year results, with highlights including an 11% jump in net income (£9.2bn). Rising interest rates have also played a part in Lloyds’ near-term success. That said, impairments did rise to £662m for the period.

Aside from results, the firm is also taking great strides to ensure future success, including a £3bn project to diversify its revenue streams.

Its reliance on the UK is a slight worry. And a choppy short-term outlook could harm Lloyds. However, I’m ignoring that in favour of the long-run growth opportunities, of which I see plenty.

The play

I like both stocks, and despite already owning them, I’m keen to top up my holdings as I look to put my money to work. If I have the cash, I’ll be looking to snap them up in the weeks ahead.

The post These 2 UK dividend shares look cheap! Here’s why I’d buy appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• How much would you need in a Stocks and Shares ISA to match the State Pension?

Charlie Keough has positions in Legal & General Group Plc and Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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.

At this moment, I think a host of FTSE 100 stocks offer great value. The index has failed to produce exciting returns in recent times. But I’m not complaining because this means buying opportunities.

With August upon us, I’m looking to add to my portfolio.

If I had the cash, here are two stocks I’d strongly consider buying this month.

Footise stalwart

First is the FTSE 100 financial services giant Legal & General (LSE:LGEN).

There are a few reasons I like the look of the stock, with the most obvious being its 8.6% dividend yield. This places it comfortably among the index’s highest returners. But what allows it to stand out from the crowd is its dividend growth over the last decade.

More recently, the business has also put its returns to shareholders in the spotlight, highlighted by its cumulative dividend plan that finishes next year.

Elsewhere, the stock also looks undervalued, trading on a price-to-earnings (P/E) ratio of just 6. This is a big discount to the FTSE 100 average of 14 times.

Last year saw the firm grow operating profit by 12%, while its earnings per share also rose to 38p, more than enough to cover its dividend rate of 19.4p per share. With the release of its half-year results due on 15 August, I’ll be watching closely for updates.

I also like the company due to its well-known brand, solid reputation, and diversification across a host of business areas. This means that regardless of short-term headwinds, the firm is well-placed to succeed in the long run.

The volatility in the banking sector in 2023 may spill over and harm the stock’s price. And we may see a short-term fall in demand for its services given economic conditions. But with its diversification, along with the passive income opportunity, I like the look of Legal & General.

Tobacco powerhouse

Next up is British American Tobacco (LSE: BATS).

Like Legal & General, I’m attracted to the stock given its meaty yield. It currently offers investors a 9% payout, albeit boosted by its flagging performance in 2023.

Regardless, last year saw the business raise its dividend by 6%. And similar to Legal & General, its shares look cheap, with a P/E ratio of around 6.

Of course, the largest risk to the company is the dwindling popularity of smoking. It’s been touted by some that the habit will be extinct by 2050.

However, the tobacco industry is still monumental in size. And to offset the predicted fall in demand in the years ahead, the company has shifted its attention to non-cigarette income streams.

New Categories revenue spiked 25% in the first half of the year, catalysed by the rising use of brands such as Velo, which offer consumers an alternative tobacco hit.

As part of this push, the business also has ambitious plans for the future, with New Categories expected to contribute over £5bn in revenue by 2025. 

The play

As high-quality companies with low valuations and solid passive income opportunities, these stocks tick all my boxes.

I already hold shares in Legal & General. So should I have the cash, I’ll look to add British American Tobacco shares to my portfolio this month.

The post I’d buy these 2 FTSE 100 stocks in August appeared first on The Twelfth Magpie.

More reading

• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000

Charlie Keough has positions in Legal & General Group Plc. The Motley Fool UK has recommended British American Tobacco P.l.c. 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.

As a retail investor, it’s been tough to navigate markets this year. While still feeling the side effects of the Covid-19 pandemic, we’ve also been hit with red hot inflation alongside the Russia-Ukraine conflict. However, this hasn’t deterred me from looking for investment opportunities. And in fact, I’m on the lookout for FTSE 100 stocks that I can hold for the long term.

Here are two I’d buy today and hold for years to come.

Consumer goods powerhouse

First on my radar is consumer good company Unilever (LSE: ULVR). The business owns over 400 brands, including the likes of Dove, Persil, and Sure. The stock has remained pretty much stagnant across the last 12 months, rising by just over 1%. In 2022, the stock is down under 1%.

While this may not seem great, given the economic conditions, this is fairly impressive, in my opinion. This year many stocks have seen sizeable chunks wiped off their market values. However, Unilever has been able to fight back against pressures such as inflation.

For me, this is important. And this is the case for a few reasons. Firstly, by buying Unilever shares I’m adding strong and recognisable brands to my portfolio. A third of the world uses Unilever products daily, highlighting the group’s everyday appeal.

What this also brings is, to a degree, pricing power. For the first half of the year, Unilever saw its revenue grow 8.1%, in part due to the 9.8% increase in prices for the period. This shows the business has the robustness to navigate difficult conditions. When looking for a long-term hold, this is a major attraction.

I also like the way Unilever is putting an emphasis on returning value to shareholders. This is predominantly in the form of a €3bn buyback scheme.

There are concerns I have surrounding the business, namely its debt. And with interest rates on the rise, this could spell further trouble. However, with its robust nature, I’d buy Unilever shares today and never look back.

Investment stalwart

My second choice would be Legal & General (LSE: LGEN). A financial and insurance services company, this year has seen it struggle. Despite rising 1% over the last six months, the Legal & General share price is down 15% year to date. Over the last year, it’s down 5%.

The main thing drawing me to this stock is its dividend yield. At the time of writing, this sits at an impressive 9.2%.

This hedges me to a large degree against inflation. And with plans to increase payouts in the future, the long-term outlook is also positive.

Like Unilever, Legal & General is a reputable brand. For the first half of the year, the business saw its operating profit and earnings per share rise by 8%. Within the period, it also made strides with its five-year (2020-2024) plan.

The months ahead could be rocky for the firm as consumers may be forced to cut back on spending. However, as a long-term buy, this short-term issue is of no concern to me. With an optimistic outlook, I’d happily buy some shares today.

The post 2 FTSE 100 stocks I’d buy for the long run! appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• 3,566 shares in this FTSE 100 stalwart earns a £1,443 second income
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. 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.

Surging inflation is continuing to cause global chaos. In the UK, official figures show that rates have now surpassed 10% and continue to spike to fresh highs. This means stagnant cash is losing value, so I’m searching for dividend stocks that can build a passive income stream to help me counter inflation.

Here are two I’m seriously considering purchasing this month.

Abrdn

The first stock I’m looking at is global investment firm Abrdn (LSE: ABDN). It’s seen over 40% wiped off its value so far this year. In the last 12 months, the Abrdn share price is down around 45%.

Despite this, I still think it could be a solid buy today.

Firstly, its main attraction is its monumental near-10% dividend yield. This isn’t inflation-beating. But it’s not far off. And therefore, this would offer me a good level of protection against rising rates.

Its latest update to shareholders wasn’t the most impressive. However, the moves the firm is making to return value to shareholders also look good to me.

There’s an initial £300m programme, including a £150m share buyback scheme.

The stock may struggle in the months ahead as investors are deterred from making investments. With the energy price cap also recently being raised, this will only magnify the issue.

However, as a source of passive income, I think Abrdn is a great buy. With a near-inflation dividend yield and the business placing an emphasis on improving this, I’d buy Abrdn shares today.

Legal & General

Another stock on my radar for this month is Legal & General (LSE: LGEN). The financial and insurance business is down around 8% over the past year. In 2022, it has plummeted by 18%.

Like Abrdn, the business has struggled as consumers have tightened their belts in the face of the rising cost of living.

However, with its fall comes a huge 9.5% dividend yield.

Legal & General is a well-known FTSE 100 business. By adding the stock to my portfolio, I’m getting a reputable brand for a beaten-down price.

It also recently posted a positive update for the first half of this year. Within the period, operating profit rose 8%, while earnings per share jumped by the same amount.

The business also had an interim dividend of 5.44p, up 5% from the year before. And to add to this, it highlighted its growing contribution toward its five-year ambitions programme. This includes a cumulative dividend ambition of potentially £5.9bn by 2024. And when searching for stocks that can create a stream of passive income for me, this is the sort of thing I want to see.

The business may face a rocky road ahead as some predict inflation could reach well over 15% come next year. And with spending already slowing, I expect to see this intensify as we head into 2023.

However, I’d still buy the stock today. As a strong brand with an impressive dividend plan, I think Legal & General would be a great addition to my portfolio in September.

The post 2 top dividend stocks to buy in September appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000
• How much would I need to invest in these FTSE 100 dividend gems for a £29,061 ISA passive income?

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Due to current economic volatility, I believe there could be some opportunities to boost my holdings on the stock market. Legal & General (LSE:LGEN) could be one of them. Let’s take a closer look at what’s been happening to the Legal & General share price as well as other fundamentals to help me decide if I should buy the shares.

Legal & General share price nears pre-dip levels

Legal & General is one of the UK’s largest financial services businesses. With roots stretching back to the 1830s, it currently focuses on four main areas. These are retirement planning, investment management, capital investment, and insurance.

So what’s the current state of play with the Legal & General share price? Well, as I write, the shares are trading for 283p. At this time last year, the stock was trading for 259p, which equates to a 9% return over a 12-month period. The shares have bounced back from the March stock market dip caused by geopolitical issues. They have returned 24% from 227p on 7 March up to current levels.

Risks to note

Tightening regulation is a tangible risk that could affect performance and returns, as well as investor sentiment for Legal & General. Financial services businesses are extremely tightly regulated here in the UK. Changing regulation could affect profitability which could affect returns.

Next, competition in Legal & General’s market is intense. There are many large players all vying for market dominance and the same customers. Some that spring to mind are RSA Insurance Group and Aviva. Competition is natural and healthy, but I need to keep an eye on this to ensure Legal & General is performing consistently to provide me with sustainable and long-term returns.

The bull case and my verdict

So to the bull case then. Before I dive into the fundamentals, I must admit Legal & General’s profile, presence, and diversified business model is definitely a plus point for me as a potential investor. It is the UK’s number-one life insurance provider. This market should only grow due to the current ageing demographic in the UK.

Furthermore, Legal & General has extensive assets under management in its investment arm, over £1.4trn in fact. It also has an extensive pension business that helps consumers, businesses, and their employees plan for that next phase in life. All these factors should help boost performance growth and sustainable returns for a long time to come.

So some fundamentals then. Despite the Legal & General share price rallying in recent months, it still looks great value for money on a price-to-earnings ratio of just eight.

One of the primary lures for me as a potential investor is Legal & General’s passive income opportunity through dividend payments. The shares’ current dividend yield stands at an enticing 6.6%. This is higher than the FTSE 100 average of 3%-4%. I am aware that dividends are never guaranteed, however.

Finally, I can see that Legal & General’s most recent annual report saw revenue exceed pre-pandemic levels. This is key for me as performance underpin returns, after all. I do understand that past performance is not a guarantee of the future, however.

Overall I believe Legal & General shares could be too good for me to miss out on right now. I would add the shares to my holdings and expect to receive consistent and stable returns for the long term.

The post The Legal & General share price is dirt-cheap with a juicy dividend yield! appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000
• How much would I need to invest in these FTSE 100 dividend gems for a £29,061 ISA passive income?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Racing inflation continues to reach fresh highs in the UK, as official figures show that rates rose further in June. With cash in the bank depreciating, I’m on the lookout for dividend stocks that can create a passive income stream for my portfolio.

Here are two I think could be top picks this month.

Taylor Wimpey

My first pick is the home construction company Taylor Wimpey (LSE: TW). The stock has seen over 25% shaved off its price in the last 12 months as inflationary pressures from multiple directions have impacted the homebuilder’s operations.

Due to this, Taylor Wimpey currently offers a strong 7.2% dividend yield. This is below the UK inflation figure for June of 9.4%. However, it does provide better value than storing my money in the bank.

The firm released its half-year figures earlier this week, showing strong growth even during challenging times. Within, it announced an interim dividend of 4.62p per share, totalling £163m.

More widely, it expects full-year operating profits to be at the “top end of the current market consensus range”.

It also stated that market fundamentals were positive and rising housing prices had offset higher costs. However, with the housing market looking like it may be hitting the brakes, the months ahead could be testing for the business.

Despite this, I’d still buy Taylor Wimpey shares. Its strong yield and positive outlook make it a buy for me.

Legal & General

My second pick is the financial and insurance services firm Legal & General (LSE: LGEN). The stock has sat pretty much still for the past 12 months. And despite falls this year, its rebounded 15% in the last month.

It currently offers a dividend yield of 6.6%. Again, this isn’t inflation-beating. However, with the firm announcing it has plans to increase these payouts in the years ahead, I think the stock is a smart move for my portfolio.

Legal & General is a renowned business, and with this investment, I’m adding an iconic brand to my holdings. It posted a strong performance last year as profits rose 28% year over year, while it also stated that it was on the path for its cumulative dividend ambition of £5.6bn-£5.9bn by 2024. This is part of Legal & General’s five-year ambitions programme. As an investor who buys for the long run, these are the sort of moves I want to see businesses making.

With this said, the release of its half-year results may paint a different picture. Rising inflation means consumers are tightening their belts. And because of this, the business may see a slowdown in investments made by customers. As a recession looms, people may be deterred from investing as they opt instead to keep cash nearby in case of emergency.

However, I’d still be keen to buy some shares in August. A solid brand, on track to achieve its long-term targets, with a meaty dividend, I deem Legal & General a must-have.

The post 2 top dividend stocks to buy in August appeared first on The Twelfth Magpie.

More reading

• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Stock markets are continuing their volatile trend throughout 2022. I’m looking to reduce my exposure to unpredictable price changes by boosting my passive income. These two UK dividend shares offer impressive yields and strong underlying fundamentals.

Legal & General

Legal & General (LSE:LGEN) shares have been on a downwards trend in 2022. Shares are down 15% year-to-date as stock markets have slid. As dividend yields are dependent on the share price, this slash in value has made the company even more appealing to me. The dividend yield has now risen to around 7%.

Alongside all of this, I consider L&G to be in a strong position to maintain dividend payments over the forthcoming years. Currently, a comfortable 54% of total earnings are paid out to shareholders. With 46% of earnings going back into the operating of the business, this shows that the company is not overstretching any finances to pay shareholders.

The financial services giant reported profits of £2.05bn for 2021, which was an increase of 28% from the year before. This record profit has put L&G shares trading with a price-to-earnings ratio of 7.6. This is considerably less than the average FTSE 100 P/E ratio of 15.

Despite this, some risks need to be considered. Legal & General has over £1trn in assets under management making it one of the UK’s leading investors. As shares have had a rough start to the year, customers will likely start withdrawing their investments, which will harm future profits for the company.

A FTSE 100 bank

Barclays (LSE:BARC) is another FTSE 100 dividend share that has had a rough start to the year. Barclays shares are down nearly 20% in 2022. This has pushed the dividend yield up to 5% with this expected to rise even further in coming years. Forecasts suggest that the dividend yield will rise to 6.5% by 2024.

Barclays only pays out 17% of total earnings to shareholders. This shows that, while the company is committed to delivering a dividend, it will not sacrifice the strength of the company to provide unsustainable payouts to shareholders.

Back in Q1, Barclays reported a rise in earnings of 10% to £6.5bn which was led by an impressive performance from the corporate and investment bank division. Alongside this, strong 2021 results have left Barclays with a P/E ratio of just 4.5, which is incredibly low.

There are some concerns about the future that I am acknowledging. If the economy is pushed into a recession, there will likely be an increase in debt defaults which will increase costs rapidly. Demand for the bank’s investment services will also fall as clients shift away from high market exposure.

Overall, both these dividend shares face several challenges in the upcoming year. However, I believe that they remain in a good position to pay out a consistent dividend and tackle forthcoming uncertainty. As a result, with my next chunk of savings, I am adding to my existing position in Legal and General and opening a new one in Barclays.

The post 2 UK dividend shares I’m buying to hold through volatile times! appeared first on The Twelfth Magpie.

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• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• Barclays shares could soon soar another 21%, according to the latest price target

Finlay Blair holds shares in Legal and General Group PLC. The Motley Fool UK has recommended Barclays. 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.

While payouts can never be guaranteed, one way of taking the sting out of inflation is to own big dividend stocks. Here are three that currently take my fancy from the FTSE 100.

Dependable dividend hiker

Top-tier insurance behemoth Legal & General (LSE: LGEN) would definitely be on my list of inflation-busting shares to buy. Analysts currently have the company returning 19.4p per share in FY22. At today’s share price, this becomes a yield of 6.7%. That’s pretty much double what I’d get from the index as a whole!

Yes, the nature of Legal & General’s business means its share price performance is dictated to some extent by the health of the UK (and global) economy. However, a 22% return over the last five years beats the frankly pretty awful 5% achieved by the FTSE 100.

It’s also worth noting that, bar the anomaly that was 2020, the company has been a consistent hiker of cash payouts. An already-sizeable dividend yield that keeps growing? That’s just what I’d be looking for if I were determined to protect my wealth from the “silent killer“. 

At just nine times forecast earnings, I’m not about to complain over the price either. 

Safe as houses

Housebuilder Taylor Wimpey (LSE: PSN) is another stock for tackling rising living costs. It’s got a great track record of returning increasing amounts of cash to its owners. This trend doesn’t look like reversing in 2022.

As things stand, the £5.5bn cap company has a stonking forecast yield of 7.9%. To put that in perspective, even the best Cash ISA right now offers just 0.61% in interest. Importantly, the extent to which this is likely to be covered by profit (and therefore likely to be paid) is also far higher than over at rival Persimmon. To me, this makes Taylor Wimpey the better buy of the two. 

Government pressure on developers to cover the costs of removing dangerous cladding from flats across the UK means housebuilders haven’t had the best of starts to 2022. However, news that prices in January climbed at the fastest annual pace in 17 years suggests the property boom still has legs to it. 

At eight times earnings, I’d be happy to buy Taylor Wimpey for the passive income it throws off. 

Monster yielder

A final stock I’d consider buying to counter the impact of inflation is precious metals group Polymetal International (LSE: POLY). At 9.3%, it’s currently one of the highest-yielding stocks in the FTSE 100.

Normally, such a huge number would be a red flag. Since dividend yields are negatively correlated with share prices (when one goes up, the other goes down), Polymetal’s incredible cash returns imply investors are concerned about the company’s outlook. 

That’s probably not far from the truth. Clearly, the ongoing tension in Eastern Europe can’t be helping sentiment. Polymetal does, after all, operate mines in Russia and Kazakhstan. The gold price has also been in the doldrums recently.

That said, a lot of this looks priced in. The shares have tumbled 34% in the last year alone and now trade at less than seven times earnings. That’s arguably very cheap considering the regularly-hiked dividend should be comfortably covered by earnings.

Throw in the diversification Polymetal offers by operating in a completely different sector and I think this is another worthy candidate for an inflation-busting portfolio.

The post 3 inflation-busting FTSE 100 dividend stocks to buy appeared first on The Twelfth Magpie.

More reading

• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The Bank of England has now warned that inflation could rise above 5% by the beginning of 2022. How, as a Foolish investor, can I respond?

One option would be to pay more attention to stocks that have a solid record of increasing dividends and thus helping to maintain (and potentially improve) my buying power. Fortunately, I think there are a number of stocks in the FTSE 100 that tick this box.

Consistent hiker

It may lack the excitement of your average, unprofitable tech stock, but Bunzl (LSE: BNZL) keeps raising its dividends year after year. Analysts expect the international distributor to return 56.1p to holders for FY21 — up around 3.7% from FY20. This would give a yield of 2.2% at the current share price.

Now, that’s admittedly a lot lower than some firms in the FTSE 100. However, my objective here is not to look for the largest yield, especially if it’s not moving higher. A big but stagnant dividend suggests a company is treading water. More often than not, this payout is eventually cut, or wiped completely.

By contrast, a consistently rising payout tends to be indicative of a well-managed, healthy business. When added to capital gains, this potentially makes Bunzl a better bet for reducing inflation risk.

One potential drawback however, is the relatively pedestrian performance of its share price. BNZL has climbed only 5% in value over the last 12 months. That’s not necessarily a deal-breaker, but it does make maintaining its dividend growth record vitally important.

Chunky dividends

A second FTSE 100 stock I’d be tempted to add to a passive income portfolio is insurance giant Legal & General (LSE: LGEN). Bar the odd exception (e.g. the anomaly that was 2020), L&G also has an excellent record of hiking its dividend.

Analysts are predicting the £17bn-cap will pay investors 18.4p per share in FY21. That’s a 4.6% increase from the previous year. It also gives a monster yield of 6.5% at today’s share price.

This is not to say that everything will be plain sailing. LGEN’s outlook is very much tied to the health of the wider economy. Back in March 2020, for example, the stock pretty much halved in value. This serves as a reminder that investing in even the most established FTSE 100 companies involves risk. 

Then again, it might be said that Legal’s price tag already gives investors a decent margin of safety. Right now, I can pick up the shares for a little less than nine times forecast earnings.

FTSE 100 core holding

A final top-tier company with a history of rewarding income seekers is BAE Systems (LSE: BA). The defence giant is in line to increase its total dividend by 3.6% in FY21, giving a yield of 4.2%.

As things stand, that won’t be enough to keep up with inflation on its own. However, it still looks hugely attractive when you’ve got Cash ISAs returning roughly one-tenth of this amount (and thus doing very little to stop the value of any deposit being eroded).

One thing all dividend hunters must accept, of course, is that increasing payouts can’t be assumed. Given that defence spending can be rather lumpy, that’s particularly worth remembering with BAE. 

Still, I’d say this is already accounted for in the valuation. Despite its share price rising 30% in the last year, BAE stock currently trades on just under 13 times predicted earnings.

The post 3 FTSE 100 dividend hikers to buy as inflation bites appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Up 27.1% in 6 months: a FTSE 100 share paying out 2.8% a year!
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How do the government’s latest changes affect your Stocks and Shares ISA?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Bunzl. 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.

In sharp contrast, although it’s never guaranteed, the stock market is about as close as I think anyone can get to earning money for very little output beyond taking a few simple steps. So how do I do this?

1. Cut back (regularly)

I reckon many people don’t get started with investing because they assume they need a lot of cash to do so. However, the truth is I can crack on with relatively little seed money.

Today, I’m using £25 per week as an example. Of course, the actual amount will vary from person to person and depend on a whole host of factors. However, I think that’s achievable for a lot of people. Yes, it could mean one less takeaway a week or skipping the daily coffee shop trip and making a brew at home. Notwithstanding this, knowing such sacrifices can genuinely lead to me earning money while I sleep more than makes up for it.

Getting into the habit of putting £25 aside every week will give me £1,300 every year to invest. Over 10 years, that becomes £13,000 in savings. At this point, such a pot of cash could deliver hundreds of pounds in passive income on an annual basis. That might pay for a family holiday or similar treat. Naturally, a far higher sum could conceivably be achieved if the weekly saving amount were £50, £100 or even more.

2. Open a Stocks and Shares ISA

Of all the five steps mentioned today, this one is right up there in terms of importance. If I’m looking to build a passive income stream, it makes absolute sense to do so using a Stocks and Shares ISA. There are two reasons for this: 

1. I won’t pay any tax on any passive income I receive
2. There are no restrictions on me withdrawing this money

Contrast this with a Lifetime ISA or SIPP (Self-Invested Personal Pension). While both of these accounts offer tax benefits, holders are heavily penalised if they try to withdraw any cash before they reach a certain age. A traditional ISA is far more flexible and allows for income to be spent if so desired.

3. Buy the best passive income stocks

The next step is choosing stocks to buy. Since the goal is to produce passive income, companies paying dividends should be prioritised here. Dividends are simply a proportion of the profits a business makes that are returned twice a year (or sometimes every quarter) to loyal holders.

Unfortunately, not all dividend stocks are created equal. The best are those that offer a decent but not excessive payout that’s consistently hiked, usually every year. Examples from the UK stock market that I’d pick out include defence giant BAE Systems and insurance firm Legal & General. 

If a dividend yield looks too good to be true, it probably means the market doesn’t expect it to be paid. As a rough rule of thumb, anything over 6% usually pushes me to do some extra research. A very high yield may be due to a company’s share price falling heavily, perhaps due to a slowdown in trading. In such a situation, I’d need to be confident of things recovering. If they don’t, that chunky dividend may be slashed or axed.

Of course, nothing in investing is guaranteed anyway so it makes sense to buy a selection of income stocks rather than just one or two. 

3. Keep costs low

An alternative to the above is to buy what’s known as an exchange-traded fund. This tracks the returns of an index — a big group of shares. An example would be the iShares Core FTSE 100. Not only does this spread my money around lots of very different companies, it also pays a respectable (and so far reliable) dividend.

Another option would be to hand my cash over to a professional fund manager who specialises in picking income stocks. The only problem here is that they often charge hefty fees.

Regardless of which approach I use, buying dividend-paying shares or funds frequently usually isn’t very cost-effective. Picking up shares of the aforementioned BAE Systems, for example, would cost me roughly £10 each time in commission. That’s 40% of my weekly savings! 

With this in mind, I’d take full advantage of any ‘regular investment’ schemes offered by my Stocks and Shares ISA provider. As it sounds, this allows me to invest every month, usually at a far lower cost than that mentioned above (maybe around £1, but with some providers it’s free). As experienced investors will know, limiting costs is one of only a few things within our control. However, it can make a huge difference to our eventual returns. The less money I spend here, the more I can put to use buying assets that eventually pay me.

Investing regularly but cheaply also avoids the temptation of trying to ‘time’ the market. Buying a stock for a lot less than it’s worth during a market crash is plainly great. That said, it’s not the most important thing for a passive income seeker. Moreover, it’s very hard to do in practice when everyone is panicking.

5. Do nothing

Aside from buying reliable dividend stocks (or a fund or two), there’s very little I need to do to lock in true passive income. In fact, investing is one of the few things in life where doing nothing can often lead to better rewards.

The key thing for me to remember here is that a lot of firms offering financial services depend greatly on effective, persuasive marketing. I’m encouraged to act because it generates fees, even if that action might not be to my benefit. In reality, there’s simply no need to watch my portfolio rise and fall and rise in value. After all, the whole point of investing for passive income is to make money while using my time more productively.

One final point. In this article, I’ve talked about passive income with the view to spending it. However, if that income isn’t needed to pay the bills and the odd treat, it’s a great idea to reinvest it back into the market and benefit more from compounding — the secret sauce for fantastic long-term returns from the stock market. That’s the Foolish way.

The post 5 steps to passive income for £25 a week appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the stocks mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.