On the hunt for two high-yielding S&P/ASX 200 Index (ASX: XJO) shares to deliver some welcome extra passive income?
Below, we look at two such companies, each trading at market-beating dividend yields. And if you're looking for more regular payouts than just twice a year, one of the stocks makes convenient quarterly payments.
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Dividend traps and forecast yields
Now, before we dive into the specifics of the two ASX 200 shares that could deliver $2,100 in annual passive income from a $20,000 investment today, a few important points.
First, when a company's share price falls over a year (as with the two companies below), it can be a sign of more trouble to come. In this case, future dividends may be lower than past dividends or the trailing yields you generally see quoted. This would, of course, negatively impact the passive income you're hoping to bank.
But, as I'll explain below, I believe both of these ASX 200 shares are set to not only deliver ongoing market-beating dividend yields but they're also well-placed to deliver share price growth in 2025.
Second, keep in mind that a properly diversified income portfolio should contain more than just two stocks. There's no magic number, but 10 is a good target. Ideally, these companies will operate in different sectors and locations. This will lower the risk of your entire income portfolio taking a hit if one company or sector faces headwinds.
With that said…
Two ASX 200 shares to buy now for passive income
The first company I'd buy for passive income in 2025 is Centuria Office REIT (ASX: COF).
The real estate investment trust (REIT) owns a portfolio of quality assets in core office markets across Australia's major cities.
As you'd expect, the Centuria Office REIT took a big hit following the outbreak of the pandemic in 2020 amid the huge shift to work from home. Over the past 12 months, the COF share price has declined by just over 9%.
However, the office market outlook continues to improve, with more companies bringing their workers back into the office either full-time or on a hybrid basis. This trend is widely expected to continue in 2025. COF also stands to benefit from lower interest rates, with the RBA potentially delivering several rate cuts this year.
As for that passive income, Centuria Office REIT pays out unfranked dividends four times a year. Over the past 12 months those totalled 11 cents a share.
At its current share price of $1.14, the REIT has a trailing dividend yield of 10.4%.
The second ASX 200 share I'd buy for its high dividend yield is mining giant Fortescue Ltd (ASX: FMG).
The Fortescue share price is down almost 34% over the last 12 months, hit in part by the slumping iron ore price which dropped to US$90 per tonne in September.
Despite the accompanying fall in profits, Fortescue rewarded passive income investors with two fully franked dividends totalling $1.97 a share in 2024. At the current Fortescue share price of $18.60, the mining stock trades on a trailing dividend yield of 10.6%.
And I'm optimistic about the miner's outlook for 2025.
Iron ore has defied bearish calls once more this year and is currently fetching around US$104 per tonne. The steel-making metal has garnered support from Chinese stimulus measures. And I expect we'll see Beijing announce more economy-boosting measures in the months ahead.
Fortescue shares could also benefit from a shift away from the company's high-cost green energy ambitions.
According to Plato Asset Management's Peter Gardner (quoted by The Australian Financial Review):
Fortescue look like they're reducing their investments for Fortescue Future Industries, which is the clean energy part of their business. That should be positive for the dividends going forward.
To the maths!
Working with the trailing yields above, if I invest an equal amount of my $20,000 into Centuria Office REIT and Fortescue shares, I could expect to earn a partly franked dividend yield of 10.5%.
That means a $20,000 investment today would see me earning $2,100 in passive income in 2025.
And, of course, I'll be hoping to see some share price gains as well.
