Why I’d buy and hold cheap dividend stocks to make a passive income

first_img Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Simply click below to discover how you can take advantage of this. Are you on the lookout for UK growth stocks?If so, get this FREE no-strings report now.While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.And the performance of this company really is stunning.In 2019, it returned £150million to shareholders through buybacks and dividends.We believe its financial position is about as solid as anything we’ve seen.Since 2016, annual revenues increased 31%In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259Operating cash flow is up 47%. (Even its operating margins are rising every year!)Quite simply, we believe it’s a fantastic Foolish growth pick.What’s more, it deserves your attention today.So please don’t wait another moment. Peter Stephens | Friday, 22nd January, 2021 FREE REPORT: Why this £5 stock could be set to surge Our 6 ‘Best Buys Now’ Shares I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Why I’d buy and hold cheap dividend stocks to make a passive income Image source: Getty Images. Get the full details on this £5 stock now – while your report is free. Enter Your Email Address See all posts by Peter Stephens Making a passive income from cheap dividend stocks could be a neat solution to a challenging problem currently facing many investors.The income returns on other mainstream assets, such as cash and bonds, are relatively low. By contrast, many dividend shares offer high yields, as well as long track records of reliable shareholder payouts.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Furthermore, the high yields on offer from dividend stocks suggest that they are cheap. This may mean they provide scope for capital growth in the coming years.Making a passive income from cheap dividend stocksCheap dividend stocks provide a simple means of obtaining a relatively high passive income in 2021 and in the coming years. The 2020 stock market crash has left investors feeling downbeat towards a number of sectors. As a result, companies in industries such as financial services, defence and oil and gas currently have yields that are significantly higher than their historic averages. This could mean that an investor is able to enjoy a high income return simply from owning a diverse range of shares.Of course, some companies with high dividend yields may face uncertain financial outlooks in the short run. This may mean that their dividends fail to grow at a rapid pace. However, those companies that have very affordable shareholder payouts alongside their high yields may offer attractive risk/reward opportunities. Investors may have factored in the risks they face through cheaper share prices, while their high dividend yields may be sufficient reward for higher risks.A reliable track record of dividend growthCheap dividend stocks could also offer a worthwhile passive income because of their solid track records of shareholder payouts. As mentioned, some sectors are facing difficult near-term outlooks. However, some of the companies operating within them have good form when it comes to maintaining dividend payouts amid uncertain operating environments. In some cases, they may even have been able to raise dividends in the past despite tough sales and profit prospects.Such companies may, therefore, offer more resilient income outlooks than investors are currently pricing in. The end result could be that they are undervalued at today’s price levels. This may mean that they are able to offer a high, and dependable, passive income stream in the coming years.Cheap dividend stocks offer capital growthCheap dividend stocks may offer much more than just a passive income over the long run though. Their high yields may mean that they offer wide margins of safety that equate to scope for capital growth in future. Therefore, a strategy that seeks to buy and hold them over the long run could deliver attractive total returns that are significantly ahead of other mainstream assets. The end result could be a positive impact on investor portfolios in 2021 and in the coming years.last_img read more

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