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With 2024 almost over, I’m building a list of the best dividend stocks I could buy in the New Year. I’m hoping an upfront investment in some quality income-paying shares will give me money to reinvest and thus to grow my portfolio.
I’m searching for companies that may provide me with market-beating passive income. So I’m targeting ones with higher-than-average dividend yields.
But this isn’t all. I’m only interested in dividend shares that also look likely to grow shareholder payouts over time. This way I can also reduce the impact of inflation on my returns, an important consideration for me as a long-term investor.
With all this in mind, here are two FTSE 100 and FTSE 250 stocks I’m considering today.
This is why I’m considering them for my Self-Invested Personal Pension (SIPP) for 2025.
The PRS REIT
Signs of rising inflation pose a threat to property stocks in the New Year. Higher interest rates won’t dampen demand at residential property landlords like The PRS REIT. But they will depress net asset values (NAVs) and keep borrowing costs at elevated levels.
Despite this, I still think this FTSE 250 share’s in great shape to keep growing profits and dividends. This is thanks to Britain’s yawning homes shortage that’s driving rents through the roof.
The imbalance is especially high for family homes like three bedroom properties, an area in which PRS REIT specialises. During the last financial year (to June 2024), like-for-like rent on the company’s stabilised sites soared 12%, up from 10% in the prior fiscal period.
Industry experts believe these fertile conditions will continue at least until the end of the decade. Estate agency Knight Frank, for instance, thinks private rents will rise by a cumulative 17.6% between 2025 and 2029.
PRS REIT could prove a great long-term source of passive income for me.
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Schroders
My next potential buy — Schroders — is a high-risk option for next year. Investor outflows have intensified in recent months, sending its share price through the floor. This could remain a theme in 2025 if economic conditions remain difficult.
However, the recent slump in Schroders’ valuation suggests it could be a great dip buy for me right now. Its price-to-earnings (P/E) ratio for 2025 has dropped below the value watermark of 10 times, at 9.7.
Combined with a near-7% yield, I think it may be too cheap to ignore.
While Schroders operates in a highly competitive market, I’m optimistic its share price could rebound strongly over the long term. I think profits here could surge as demographic factors, allied with growing fears over future State Pension levels, drive demand for asset management services.
With one of the most recognisable names in the business, Schroders has great brand power it can use to leverage this opportunity too. I’ll look closely at adding its shares to my SIPP soon.
