2022 has seen plenty of ups and downs for stock markets. Inflation has reached levels not seen for decades and interest rate rises have weighed on growth stocks. Russia’s invasion of Ukraine has also contributed to inflation and caused more market turmoil.
Amid the current market conditions, I’ve increasingly looked for dividend paying stocks that can give me income this year. These stocks provide near-term benefits, unlike many growth stocks, and can help my portfolio negate the impact of inflation.
So, here are three passive income picks that I’ve bought or am considering for my portfolio.
Should you invest £1,000 in Lloyds Banking Group right now?
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Vistry Group
I’m a fan of housebuilders and I think many are undervalued right now. The industry is also a good place to look for dividend stocks. Vistry Group (LSE:VTY) is an attractive passive income opportunity, with plenty of upside potential. I recently bought this stock ahead of its ex-dividend date. However, if I bought at today’s price I could expect a 7% dividend yield. The dividend has been well covered in recent years.
In its most recent update, Vistry said it had made “excellent progress” in 2021 as completions rose 23.7% to 11,080. This was reflected in pre-tax profits, which rose to £319.5m. The figure exceeds pre-pandemic levels by some distance.
However, Vistry has warned that the government’s plan for the cladding crisis could cost it up to £50m. That’s substantially more than the £25m it had set aside. Interest rate rises also represent a risk for housebuilders but there doesn’t seem to be too much evidence of a drop-off in demand just yet.
Lloyds Bank
I’ve recently bought shares in Lloyds (LSE:LLOY). One reason in the attractive, but not world-beating 4.3% dividend yield, another is its potential to grow. For me, Lloyds is a great opportunity to buy into a blue-chip stock offering plenty of upside potential.
As I write, Lloyds is trading at around 46p a share. That’s considerably down on its pre-pandemic price and massively down on where it was a decade ago. The bank currently has a price-to-earnings ratio of 6.12. For me, that’s cheap, especially for a well-known brand like Lloyds.
Lloyds recently reported a bumper year. Net income rose to £15.8bn, a 9% rise. Underlying net interest income increased to £11.1bn, a 4% rise. Profit came in at £6.9bn, which was below the £7.2bn average analyst forecast that the bank compiled.
A lull in the property market could hurt this big lender, but higher interest rates also mean larger margins. Although it’s worth noting that inflation could hurt the business too.
While I’m confident in the core business, I’m also interested by the bank’s decision to become a property owner. The banking giant wants to purchase 10,000 homes by the end of 2025.
Rio Tinto
Rio Tinto shares shot up this year on the back of soaring commodity prices. After a recent fall, I could expect a 10.22% dividend yield if I bought in today. In 2021, the firm reported underlying earnings of $21.4bn. The figure is $8.9bn higher than in 2020. However, I’m slightly concerned about the impact of China’s lockdowns on demand for commodities and their prices. Falling commodity prices could really hurt mining stocks. While I don’t see China battling with Covid-19 forever, I think supply could start to outstrip demand. However, I’d buy this for the long term.
