With stock markets tumbling on recession fears, several passive income stocks are now offering massive dividend yields. Typically, seeing high percentage payouts can be a sign of trouble ahead. Yet, that’s not always the case. And I’ve spotted four companies that look primed to thrive, even if a recession does hit the British economy. Let’s take a closer look.
2 high-yield passive income stocks
Historically, some of the best businesses to own during a recession can be found within the consumer staples sector. That’s because regardless of what the economy is doing, people still need the essentials like food, beverages, and cleaning products.
For the smoking population, this list obviously includes cigarettes and other tobacco-based products. Therefore, both Imperial Brands and British American Tobacco are looking very interesting right now. Both passive income stocks offer impressive yields of 8.2% and 6.6% respectively. And with analyst forecasts indicating both revenue and profits to continue climbing over the next couple of years, dividends are likely to do the same. At least that’s what I think.
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It’s not a risk-free investment, of course. With inflation driving up prices, it will likely encourage some smokers to reduce their consumption, or perhaps quit entirely. Meanwhile, with more health awareness surrounding the impact of smoking and increased regulatory restrictions on tobacco products, both firms could be in trouble in the long run.
Having said that, these companies are already investing in new healthier alternatives to their existing flagship product lines. That, to me, sounds like management adapting to the shifting landscape which, in my experience, is a positive sign. Hence why I’m considering both these stocks for my passive income portfolio.
Profiting from the shift to a green world
With the impact of global warming becoming ever more apparent, governments and businesses worldwide have begun ramping up their investments in renewable energy technologies. Electric vehicles, solar power, and hydrogen fuel cells are some of many evolving technologies that could drastically cut global carbon emissions.
Demand for renewable metals such as copper, nickle, and lithium is surging. And with existing supply unable to keep up, the prices of these raw materials are climbing near multi-decade highs. Fortunately, that’s created quite a favourable environment for mining businesses.
Companies like Rio Tinto and BHP Group look especially well-positioned to capitalise on the opportunity. And with their operations having largely fixed costs, the price increases almost directly translate into profit. So it’s hardly surprising that these passive income stocks are paying a 9.4% and 8.5% dividend yield respectively.
Obviously, metal prices won’t climb forever. And with more mining groups seeking to take advantage, the global supply will eventually catch up. Profit margins will start falling again when this inevitably happens, potentially compromising the impressive payout.
However, establishing new extraction sites is a multi-year process with plenty of regulatory hurdles to overcome. So, personally, I believe these businesses can continue to deliver impressive results for a long time. That’s why they’re on my list of passive income stocks to buy now.
