A £20,000 investment spread equally across these high-yield UK shares would provide me with dividends of £1,370 this year, based on City forecasts. But they are more than just top stocks to buy for the near term. I think they could be great ways to make passive income for years to come.
Pan African Resources
Gold miner Pan African Resources (LSE:PAF) hasn’t had the best of luck in 2023. While prices of the safe-haven metal have risen, problems across its mine portfolio have pulled the share price sharply lower.
Mining is a highly complex process and operational problems are never far away. In recent months Pan African has cut its production forecasts for the 12 months to June due to power-related issues, disappointing project ramp-ups, and “geological issues.”
Yet I believe the AIM share’s ultra-low price still makes it very attractive right now. That recent fall now leaves it trading on a forward price-to-earnings (P/E) ratio of just five times.
In fact, from a production standpoint there’s a lot I like about the South African miner. For example, construction of its Mintails tailings project is due to begin after the firm secured funding earlier this month. First production is slated for December 2024 and will boost group output by 25%, to 50,000 ounces a year.
In terms of this year’s dividends, City analysts have tipped a total payout of 0.6 US cents per share. This results in a healthy dividend yield of 5.2%. Encouragingly the reward for financial 2024 is covered four times over by expected earnings too.
Glencore
FTSE 100-listed Glencore (LSE:GLEN) is another high-yielding dividend stock that’s grabbed my attention.
It carries the same operational risks that have battered Pan African’s share price in 2023. But the beauty of investing in an industry giant like this is the size of the asset portfolio.
Glencore operates more than 60 different production assets across the globe. This means that output issues at one or two projects tends not to be devastating for profits at group level. Additionally, the business has a large trading unit that reduces the impact of mine-related troubles on earnings still further.
In fact think Glencore could be one of the FTSE’s best bargains at current prices. The firm trades on a P/E ratio of 8.7 times for 2023 following recent share price weakness. It also carries a mighty 8.5% dividend yield.
I think the miner is in great shape to meet brokers’ dividend forecasts too. Coverage isn’t ideal at 1.4 times, but a strong balance sheet means it should be in good shape to meet payout forecasts. Net-debt-to-EBITDA stood below 0.2 times as of June.
Profits at commodities companies are highly sensitive to supply balances. But I’m confident that earnings will rise strongly as decarbonisation and urbanisation initiatives drive demand, and a dearth of new mine supply pushes markets into material deficits. In this scenario metals prices could shoot through the roof.
