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When we invest with the aim of building up a passive income stream, it’s the dividend yield that counts, right? As long as that’s good, why should the price-to-earnings (P/E) ratio matter?
Well, I might invest mainly for dividend income. But that doesn’t mean I’d pass up any share price gains from a potentially undervalued stock.
No, I’d consider that a nice bonus, which could give me a healthy boost should I decide to sell some shares in the future.
Cheap, with dividends
The best kind of company to consider buying for passive income, surely, is one that combines both valuation measures. I’m talking about strong dividend forecasts, plus a low P/E valuation.
The one I have in mind today is NatWest Group (LSE: NWG). The share price is actually up 54% in the past five years.
But that still gives us a forecast P/E of just 7.8 for this year, which is only around half…
