Business & Investment

Two UK dividend stocks to buy to try an average of £ 200 a month on passive income

When thinking about UK dividend stocks, there are several factors that are worth discussing. It’s mainly about which one is best for you. Separately, we are considering the types of dividends required to reach our monthly average of £ 200 target. Finally, it’s about thinking about ways to simplify my investment strategy enough to give me passive income.

UK dividend stocks I like

Polymetal International Is a mining company within the FTSE 100. Performance in 2020 was very strong, supported by rising gold and other commodity prices. As a result, the payout ratio to investors increased by approximately $ 480 million. This is currently Dividend yield 6.76%.

I think the outlook is in favor of polymetal, so consider buying UK dividend stocks now. One of the notable risks is currency risk, as mines in Russia and Tanzania are exposed to highly volatile currency movements. If one of the local currencies depreciates significantly, this can affect overall profits.

Another company I like right now persimmon.. UK-based homebuilders are enjoying a good time thanks to the high demand in the real estate market. The company is also fortunate to enjoy high profit margins, which generate good cash flow and help pay dividends. The operating margin in 2020 is 27.6%.

The dividend yield is currently 7.9%, which is very healthy for a UK dividend stock. The main risk I can see is whether there will be a slump in home prices after the stamp duty vacation is over. Or if the UK falls into a double-bottom recession due to the effects of Covid-19.

I’m trying to average £ 200 a month

Let’s say you own the same amount of both of the above UK dividend shares. This will result in an average dividend yield of 7.33%. To get an average of £ 200 a month (£ 2,400 a year), you need to invest £ 32,742 in these stocks.

It’s a lot of money now, but there are many different perspectives. With so much cash, I should have been able to invest at once. It’s a bonus and you can fix the yield.

If not so many, just buy UK dividend stocks on a regular basis. Yields are constantly changing based on stock prices, so you may need to reach more or less than £ 32,742 to earn £ 200 a month on your passive income.

It’s a risk. I wish I could fix the yield when it was high, as if the yield was going down. But the advantage of regular investment is that I can average my risk of buying over time. If we did this last year, we would have benefited from being able to buy UK dividend stocks at a discounted price in the event of a stock market crash.

Overall, buying stocks with sound dividend yields like Polymetal and Persimmon helps me generate passive income.

Jonathan Smith There are no positions in any of the listed shares. Motley Fool UK does not have a position in any of the listed shares. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by examining different insights, Better investors than us.

Two UK dividend stocks to buy to try an average of £ 200 a month on passive income Two UK dividend stocks to buy to try an average of £ 200 a month on passive income

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