No savings? I’d buy these 2 stocks to start earning passive income today

Here, this Fool targets a FTSE 100 and FTSE 250 stock he think’s investors should consider when looking to generate passive income.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

British Pennies on a Pound Note

Image source: Getty Images

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.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Starting out on an investment journey with no savings can be daunting. However, I think one of the best ways for investors to begin growing their funds is by targeting passive income.

Its often thought that we need a large sum of cash to start generating a lot of money from investing in income stocks. But this is far from true. And over time, smaller pots of cash can begin to grow.

If I had to start today, here are two stocks I’d target.

Should you invest £1,000 in Games Workshop right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Games Workshop made the list?

See the 6 stocks

FTSE 100 stalwart

My first stop would be Legal & General (LSE: LGEN). In terms of passive income opportunities, in my opinion, I’d be hard-pressed to find many better options out there.

As I write, it currently offers investors a dividend yield of just above 9%. This places it fifth in terms of the FTSE 100 highest payers. It also sits firmly above the average of the index (3%-4%).

What’s more, the business introduced a plan to drive shareholder rewards. With it already generating £3.6bn in cumulative dividends, it’s on track to reach its target of £5.6bn-£5.9bn by next year.

Now, I do have a few concerns with Legal & General. To start, the stock has taken a hit in recent times due to the volatility seen in the financial sector following issues earlier this year. And it’s yet to recover from this.

In addition, the firm’s CEO, Sir Nigel Wilson, has been at the helm for more than a decade. However, he’s set to step down at the end of the year and this could spark uncertainty.

Regardless, as a business with a strong customer base, I remain bullish on the stock for the long term.

FTSE 250 growth stock

My next choice would be the exciting FTSE 250 company Games Workshop (LSE: GAW). The business has experienced major growth in the last five years. And as a result, so has its dividend.

Currently, Games Workshop yields around 4.5%. In the last decade, this has grown a whopping 400%.

It’s not only a growing dividend that I’m attracted to. Despite headwinds, the business has been able to post consistent double-digit revenue growth in the last few years, including 14% in its latest update.

One of the largest threats to the business is rising competition as powerhouses such as Disney try and grab a share of its lucrative market. Therefore, to offset this, it’s placed a larger emphasis on non-plastic revenue streams. The most noticeable of these is its upcoming series on Amazon.

It’s been successful in passing on costs to consumers as inflation continues to eat away at its bottom line. Yet should costs continue to rise, potential further price hikes could see customers looking elsewhere.

With its loyal customer base, I’m not too concerned about this. And with it highlighting its growth capabilities in recent times, I think the years ahead have the potential to be exciting for the business.

What I’d do

If I were starting today, I’d strongly consider both companies. I already own Legal & General stock. But with any spare cash in the weeks ahead, I’m looking to buy some shares in both. I think other investors should consider these stocks too.


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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Keough has positions in Legal & General Group Plc. The Motley Fool UK has recommended Amazon.com and Games Workshop Group Plc. 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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Happy young female stock-picker in a cafe
Investing Articles

Here’s where Gen Z are sniffing out passive income opportunties

Where are the younger generation of investors putting their money? Do they know something about passive income the rest of…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

3 ways to try and grow an ISA’s value faster

Christopher Ruane explains a trio of techniques he applies as he tries to grow the long-term value of his Stocks…

Read more »

Engineer Project Manager Talks With Scientist working on Computer
Investing Articles

This FTSE investment trust is stinking out my Stocks and Shares ISA. Time to sell?

A FTSE laggard is holding back the value of this Fool's ISA portfolio. With other stocks doing so well in…

Read more »

Business man pointing at 'Sell' sign
Investing Articles

Has the great Nvidia stock price crash started?

The Nvidia stock price surge has faltered, as the gap between tech stocks and the wider market grows. Is it…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

It’s been a great week for this FTSE 250 legend. But will it last?

Our writer reflects on the recent share price performance of a FTSE 250 icon that’s hit the buffers since becoming…

Read more »

A close up side view of a father and his young daughter who is a wheelchair user having a cute affectionate moment with each other whilst on a family day out in a beautiful public park in Newcastle upon Tyne in the North East of England.
Investing Articles

Could this surging FTSE 100 stock rise another 40% in the next year?

One analyst has this FTSE 100 stock pegged for a 40% gain over the next 12 months. Is it the…

Read more »

Departure & Arrival sign, representing selling and buying in a portfolio
Investing Articles

How 129 words just wiped 40% off this FTSE 250 stock!

Does the 40% drop in the WH Smith (LON:SMWH) share price present an obvious dip-buying opportunity? Or is this FTSE…

Read more »

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing Articles

After last week’s results, I’m seriously keen on this record-high FTSE 100 dividend share

At hitting a record high in the wake of stellar H1 results, could this 5.7%-yielding FTSE 100 stock be my…

Read more »