A 9.5% dividend yield! 2 dividend stocks to consider for long-term passive income

A lump sum or regular investment in these UK dividend stocks could yield substantial passive income over time, predicts Royston Wild.

Posted by Royston Wild

Published 12 October

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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.

These dividend stocks offer enormous yields and long records of payout growth. Here’s why they demand serious attention right now.

A top REIT

Real estate investment trusts (REITs) can be great shares to target long-term passive income. Sector rules state at least 90% of annual rental earnings must be paid out in dividends. This can make the cash rewards they deliver less volatile than those from other dividend shares.

Unite (LSE:UTG) is one trust I feel demands close attention. It operates in the highly defensive student accommodation market, which gives profits protection from changing economic conditions. Following its acquisition of sector rival Empiric Student Property, it will be the UK’s largest operator with 75,000 beds, chiefly centred on the country’s strongest universities.

Unite has proven one of the UK’s most reliable dividend growth stocks, with payouts rising almost every year since 2011. The only exception came in 2019 when Covid-19 uncertainty forced a reduction.

For this year, the REIT’s dividend yield is a large 6.2%, which is almost double the FTSE 100 average of 3.2%. This figure has been boosted by a sharp fall in Unite’s shares on Wednesday (8 October) — then, the company said sales to date had delivered rental growth of 4%, down from 8.2% in the same 2024 period.

I think this represents an attractive dip-buying opportunity to consider.

Competition is tough, and Unite’s problems are being compounded by extra stress on students’ budgets right now. But the long-term sector outlook remains robust, and the company’s increased scale gives it a significant advantage. I expect dividends to continue rising over the next decade and beyond.

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.

Going green

Foresight Solar Fund (LSE:FSFL) is another top dividend stock worth serious attention after recent price weakness.

It’s fallen in value as optimism over sustained interest rate cuts over the next year have declined. As with Unite, asset values come under pressure when rates are higher, and cost of borrowing pressures increase.

While this issue can be significant, the impact it’s had on Foresight’s dividend yield merits serious consideration. Its forward yield is now an enormous 10.7%.

Like any renewable energy stock, the company has significant long-term investment potential as the move from fossil fuels continues apace.

Foresight has ambitious plans to capitalise on the green transition — the business has 1 GW of capacity across its assets, and plans to treble its development pipeline to 3 GW from current levels, with growth focused on the UK and Europe where clean energy policy is especially favourable.

Investing in energy producers has another significant advantage for investors. Electricity demand is largely unchanged across the economic cycle, giving companies the financial strength and the confidence to steadily raise dividends.

In the case of Foresight, annual dividends have risen each year since it listed on the London stock market in 2013. It’s a theme I expect to continue long into the future.