5 top stocks for passive income in 2023

Currently, I have several stocks that generate passive income. I am looking to buy some more though. With that in mind, here are five dividend-paying stocks I’d like to see in 2023.

FTSE 100 income shares

One stock that is a top pick for income next year is insurance and investment management Legal & General. This deposit, which is part of FTSE 100 index, currently offering a yield of more than 7%.

LGEN has built an impressive dividend track record over the last decade and has a solid dividend coverage (earnings to dividend ratio) today. So, the income here is quite safe.

On the downside, this stock can be volatile. If I’m going to buy, I need to be prepared for changes in stock prices.

Elsewhere in the FTSE 100, I look Tesco. The yield is almost 5% now.

What I like about Tesco is that it is a relatively defensive company. People won’t stop buying food because of a recession (even if they can sell it to supermarkets for less).

This defensiveness is reflected in the company’s share price, which tends to be less volatile than the broader market.

Come back regularly

Looking outside of Footsie, one stock I see a lot of appeal in Renewable Energy Infrastructure Group (TRIG). It is a renewable energy investment company that owns a portfolio of wind and solar farms in the UK and Europe. The objective is to provide a steady return to shareholders through dividends.

TRIG is a reliable dividend payer and for 2023, it is expected to pay 7p per share to investors. That equates to a yield of about 5.5% at the current share price.

It is important to note that TRIG sometimes needs to raise capital to finance growth. This could send the stock price lower. I’m comfortable with this risk though.

Secure income

On the real estate investment trust (REIT) board, I’m thinking of buying Major Health Properties. Invest in healthcare properties such as GP surgeries.

One thing I like about these REITs is that a large portion of their rental income is subsidized by the government. So it’s impossible to find yourself in a situation where you can’t collect rental income (increasingly so in today’s environment).

I also like the produce they offer. Now, it’s more than 6%. The price here is higher than the market average, so the stock is not cheap. I think it deserves a premium however.

Strong dividend growth

Finally, in the small space, I saw Impact Asset Management. It is a specialized investment company specializing in sustainable strategies. Currently, the yield offered here is around 4%.

I was drawn to this stock for two main reasons. First, interest in sustainable investment is booming. So I think there is potential for strong total returns (capital gain plus income) in the long term.

Second, the company is increasing its dividend at a rapid pace. Recently, it increased its full-year payout by a whopping 34%. So it could be a cash cow going forward.

The risk here is that earnings (and stock prices) could take a hit if the stock market falls in 2023.

At the current share price (P/E ratio less than 20), I think the risk/reward proposition is attractive.