8.1% dividend yield. 2 dirt cheap passive income stocks I’d buy to target £1,620

Looking for top passive income stocks to buy on sale? I think these two IT giants could be too cheap to ignore at current prices.

Royston Wild

Published 23 June,

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.

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The London stock market has been underperforming for years. But it’s not all bad news. After all, investors today can now pick up some top passive income stocks at rock-bottom prices.

Two of my favourite dividend shares are shown below. As you can see, each trades on a super-low price-to-earnings (P/E) ratio and carries a gigantic dividend yield.

STOCK FORWARD P/E RATIO FORWARD DIVIDEND YIELD

Impact Healthcare REIT (LSE:IHR) 7.7 times 8.3% 

Greencoat Renewables (LSE:GRP) 9.7 times 7.9%

If broker projections are accurate, I have a great chance of supercharging my dividend income over the next 12 months.

More accurately, a £20,000 lump sum invested equally across these stocks would give me a £1,620 passive income during the period. This is based on an average dividend yield of 8.1%.

I’m confident that these UK shares will steadily grow dividends over the long term, too. Here’s why I’d buy them for my own portfolio if I had spare cash to invest.

Cheap REIT

High interest rates are an ongoing threat to real estate stocks. They depress the net asset values (NAVs) of these companies’ property portfolios and push up borrowing costs.

But the stunning all-round value of Impact Healthcare REIT suggests now could be a great time to buy. Not only does it trade on those rock-bottom P/E ratios and carry that 8%+ dividend yield. At 85.1p per share, Impact also trades at a near -27% discount to its estimated NAV per share of 116p.

As a major care home provider, it looks in good shape to capitalise on the UK’s growing elderly population. And REIT rules mean it could be an especially good pick for future passive income.

In exchange for certain tax breaks, these shares must pay at least 90% of their annual rental profits out by way of dividends.

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.

Green dividend machine

Investing in renewable energy stocks could also deliver the holy grail of healthy capital appreciation and dividend income. Demand for clean energy is growing sharply as legislators take steps to wean their countries off fossil fuels.

I think Greencoat Renewables could be a great share to help me exploit this opportunity. The business owns onshore and offshore wind farm assets all across Europe, from which it sells power to electricity companies.

On the downside, its ability to generate power can be significantly compromised during calm weather periods.

But on the other hand, the stable nature of energy demand means its earnings aren’t affected by broader economic conditions, unlike most other UK shares. This in turn can make it a dependable dividend payer year after year.

What’s more, Greencoat’s wide geographic footprint helps reduce the threat of adverse weather patterns at group level. The bulk of its assets are in Ireland. However, its wind farms are also in France, Spain, Sweden, and Finland.

Over the long term, I think this could prove a hugely lucrative stock to own in my portfolio.

Inflation recently hit 40-year highs… the ‘cost of living crisis’ rumbles on… the prospect of a new Cold War with Russia and China looms large, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

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.

Royston Wild 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.

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