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My goal today is to find the best dividend paying stocks and exchange traded funds (ETFs) to buy on the London stock market. Here are three I can take to get cash flow to invest.
REIT data
Real estate investment trusts (REITs) can be good buys for dividend income. In order to receive certain tax breaks, they need to distribute at least 90% of the annual rental income to shareholders.
Supermarket Income REIT (LSE:SUPR) is one such trust on my radar. Its trailing 12-month yield grew by 8.3%. By comparison, the average yield is open FTSE 100 shares settled back 3.6%.
As the name suggests, this local stock is focused on the food retail sector. This can have many benefits for investors. Stable demand for consumer goods means that rent accumulation remains strong throughout the economic cycle.
In addition, Supermarket Income lends its properties to large and financially strong companies such as Tesco again Sainsbury. This gives it the appearance of more profit (and thus profit).
The company is vulnerable to any interest rate changes, especially if rates rise. But with UK inflation at a three-year low of 1.7%, this threat looks dire in the short to medium term at least.
Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice.
An ETF
With a trailing 12-month yield of 5.7%. iShares Euro Dividend UCITS ETF (LSE:IDVY) has recently delivered bigger gains than most UK stocks.
The fund is invested in the 30 most productive companies in the eurozone. To give you a taste, some of its biggest assets are the Dutch bank ABN Amrothe Spanish energy supplier Endesaagain French the social media giant an orange.
As an investor, this diversification offers significant benefits. It means that every return I make is not dependent on a single business, industry, or location.
This can make it a much safer source of passive income than investing in individual stocks. That said, with 58.5% of its capital tied up in financial stocks, the shares could still be vulnerable during an economic downturn.
Still, its high yield and low price-to-earnings (P/E) ratio make it an attractive investment in my book. Its profits are multiplied by 8.7 times.
Eurostar
Continuing the continental theme, I guess Schroder European Real Estate Investment Trust (LSE:SERE) would be another good dividend buy. paid a dividend of 7.2 %.
This is another REIT, which means it also has to pay out a large portion of its profits in dividends. With eurozone economic conditions improving and inflation falling, now would be a good time to consider buying.
Schroder invests primarily in retail, office, and industrial properties in what he describes as “winning cities and regions“. We're talking about the likes of Berlin, Paris, and Hamburg – places with high growth, population growth, strong employment, and good infrastructure. This suggests that its properties can be an excellent long-term investment.
Recovery here could be disappointing if the eurozone economy experiences new pressure. However, the trust's exposure to different countries and sectors helps reduce risk for investors, making it an attractive stock to consider.
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