2 top dividend stocks to consider for passive income in September

Dividend stocks are one of the London Stock Exchange’s strongest selling points, offering investors a reliable source of passive income.

Even with the FTSE 100 near a record high after rising 26% in two years, the blue-chip index offers a 3.3% dividend yield, which easily tops the S&P 500‘s 1.2%. Consequently, there are plenty of options to choose from.

Here are a pair of FTSE 100 income shares I reckon are worth thinking about.

Banking giant

HSBC (LSE:HSBA) likely needs no introduction. It’s the Footsie’s second-largest firm, just behind AstraZeneca, and the biggest in Europe by both total assets and market capitalisation.

The lender’s share price has been on top form, jumping 45% over the past year. Despite this strong performance, the bank stock‘s still offering a 5.4% forecast yield. That’s higher than the 10-year gilt yield (4.7%).

Of course, no dividend is destined to be paid. But HSBC’s dividend cover’s strong, which means the prospective payout’s well covered by forecast earnings. In fact, HSBC’s dividend cover is 2, which is very healthy.

The bank has been steadily shifting its focus eastwards to capitalise on the growing markets of Asia. However, it’s currently facing uncertainty with tariffs impacting Asian economies. This week for example, the US imposed a punitive 50% tariff on India.

Disrupted trade between East and West may lead to a regional economic slowdown, impacting HSBC’s near-term growth.

Looking to the longer term though, HSBC’s strategic pivot should reward shareholders. Inside the next two decades, around two-thirds of the world’s middle class will be based in Asia, with hundreds of millions of new consumers emerging.

HSBC’s in prime position to take advantage of this growth, which should support steadily-rising dividends for shareholders.

Potential comeback stock

Bunzl‘s (LSE:BNZL) a very different proposition. It distributes a wide range of everyday consumables to businesses across sectors including retail, foodservice, and healthcare. Think paper plates, pizza boxes, disinfectant wipes, and stationary. 

This type of unglamorous-but-necessary business can be a great source of dividends. Bunzl’s grown its payout at a steady compound annual growth rate of 7.5% over the past few years. 

Recently though, the company’s hit a speedbump, with a slowdown in its North American business. This includes weak sales, higher costs and execution missteps in its shift toward own-brand products.

Weakness persisting longer than expected is a key risk, as the US is Bunzl’s biggest market by far. 

However, in its first-half report released on 26 August, management said that actions “taken in our largest business in North America have re-energised the team and we are seeing early positive indicators of success”.

This optimism was backed up with the resumption of a £200m share buyback programme, which had been paused in April. Meanwhile, in another promising sign, the interim dividend was held steady. 

I remain confident in Bunzl’s underlying resilience and strong business model, and its ability to deliver consistent compounding growth in the medium-term.

Bunzl CEO Frank van Zanten.

The stock’s declined 23% year to date, which translates into a forecast dividend yield of 3%. Pair this with a potential rebound in the share price and I think this FTSE 100 stock looks attractive right now.

The post 2 top dividend stocks to consider for passive income in September appeared first on The Motley Fool UK.

More reading

• Could this legendary UK dividend share be turning the corner?
• Are the FTSE 100’s banks really cheap at the moment?
• The Bunzl share price jumps 4% on H1 results. Is it ready for a resurgence?
• 2 FTSE shares I’ll consider buying if we get a stock market crash
• Here’s how to aim for £500 in monthly passive income starting from zero

HSBC Holdings is an advertising partner of Motley Fool Money. Ben McPoland has positions in AstraZeneca Plc and HSBC Holdings. The Motley Fool UK has recommended AstraZeneca Plc, Bunzl Plc, and HSBC Holdings. 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.

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