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I’d buy these dividend stocks for sustainable passive income

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Inflation in the UK just went above 10%. This means that there’s never been a better time to think about generating some additional passive income to offset the rising cost of living.

One way that I look to do this is by owning shares in businesses that distribute their earnings as dividends to shareholders. The dividends I receive can either be used as income, or reinvested to generate even more income in the future.

With that in mind, here are four dividend stocks that I’d buy today. I think that any of them might be great additions to my passive income portfolio.

Rio Tinto

Rio Tinto (LSE:RIO) is a mining company. The stock has a trailing dividend yield of 9.75%.

The company’s earnings (and dividend payments) fluctuate with the price of the commodities it produces. Since these have fallen lately, the stock has struggled and the dividend is forecast to drop.

In my view, however, this will normalise over time. That’s why I think now could be a great time to add Rio Tinto shares to my portfolio.

Life insurance provider Legal & General (LSE:LGEN) has a dividend yield of 8.77%. In many ways, the stock is the opposite of Rio Tinto.

Where Rio Tinto is prone to dramatic fluctuations in profitability as commodity prices shift, Legal & General is a steady compounding operation. I expect its dividend to grow slowly over time.

The downside with this stock is that it doesn’t have a significant competitive advantage that I can see. But it has established itself well over time and I think that makes it a good passive income choice for me.


Another company that I think offers an attractive passive income opportunity is Kellogg (NYSE:K). Kellogg shares come with a 3.12% dividend and trade at a price-to-earnings (P/E) ratio of 17.5.

The issue with Kellogg is that its cold cereal business has been struggling. Put simply, fewer and fewer people are eating cereal in the morning (though surprisingly many are eating it at other times of the day). 

But most of Kellogg’s revenue comes from products other than cereal. To me, this looks like an opportunity to acquire shares in a steady business with some strong brands at an attractive price.

BP Preferred

Last on my list is BP 8% Preferred (LSE:BP.A). As a preferred stock, this is a bit different to the others.

The stock pays a fixed dividend of 80p per year. At current prices, that’s a yield of around 4.5%.

BP has to pay its preferred dividends in full before it makes any payments to its common shareholders. So there’s a degree of safety in this stock that isn’t there with the others on my list.

The risk with the stock is that it can be harder to sell – preferred stocks aren’t trading in the same volume as common stocks. But since I intend to keep the shares and use them to generate passive income, I don’t see this as a problem.

The post I’d buy these dividend stocks for sustainable passive income appeared first on The Motley Fool UK.

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Stephen Wright has positions in Kellogg. 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.