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Looking to make a big passive income at low cost? Here are two great dividend shares worth thinking about as the summer season kicks off.
Supermarket Income REIT
Real estate investment trust (REIT) Supermarket Income REIT (LSE:SUPR) trades at a near-10% discount to its net asset value (NAV) per share. It also carries a large 7.6% forward dividend yield.
While it’s sensitive to interest rate changes, I still think it’s potentially a great low-risk way to source a second income. And especially at today’s prices.
As the name implies, this property stock provides exposure to the ultra-stable food retail market. But this isn’t all: by focusing on the industry’s leading players — ‘Big Four’ operators Tesco and Sainsbury‘s are just a couple of big hitters on its books — rent collection and occupancy issues are rarely an issue.
What’s more, by focusing on omnichannel stores, Supermarket Income draws out the threat posed by online grocery to future earnings.
As a REIT, the business is obliged to pay at least 90% of its annual rental profits out by way of dividends.
As I mentioned, the stock is vulnerable to interest rate changes that push up borrowing costs and depress asset values. But on balance I think it’s a great way to consider sourcing a long-term income.
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NextEnergy Solar Fund
With a 12.7% forward dividend yield, NextEnergy Solar Fund (LSE:NESF) is the third-highest-yielding UK investment trust today. I think it has tremendous long-term potential as demand for green energy heats up.
It’s not just the rush to net zero that’s driving renewable energy growth. Rising concerns over energy security (worsened by the Russia-Ukraine war) are also propelling investment into sustainable sources and making capacity extensions more cost effective.
NextEnergy Solar has 101 assets spread across Europe, The Americas and Asia, providing solid geographic diversification. Roughly 85% of its sites are located in the UK too, where the government’s renewable energy policy is especially favourable for operators.
On top as packing that huge yield, the trust’s shares trade at a near-30% discount to their NAV per share. This represents great value in my view.
Like Supermarket Income, NextEnergy solar is highly sensitive to rises in interest rates. But this isn’t all, as changes to favourable green investment policy could also impact future profits. Recent changes in the US show that supportive government initiatives can be subject to change.
However, I believe these risks are more than reflected in the cheapness of the fund’s shares. On balance it’s still a solid passive income stock to consider.
