This is a strange time to be hunting for dividend stocks. The 10-year gilt is yielding 5.14%, meaning the government will pay investors handsomely for doing nothing more than existing.

With share prices in general still near record levels, that’s worth being aware of. Despite all of this, a couple of stocks still look genuinely interesting from a passive income perspective.

AEW UK REIT

AEW UK REIT (LSE:AEWU) owns 34 commercial properties across industrial, high street retail, retail warehouse, office and leisure. At 106.8p — just below its 107.8p net asset value — the 8p annual dividend is a 7.49% yield.

Big yields aren’t unusual for REITs — they’re obliged to hand back almost all their rental profit. What’s less usual is AEW’s consistency and internal growth.

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The dividend has been 2p a quarter for 42 consecutive quarters, through Covid and the 2022 gilt crisis. Importantly, it’s now effectively covered by earnings of 7.98p per share.

The engine is the 5.69-year time to expiry. Short leases let management refurbish, repurpose and re-let at higher rents, instead of sitting on a 15-year contract that doesn’t go up.

The strategy comes with risks. A 9.43% vacancy rate is unusually high and that’s something no REIT wants to contend with. 

That’s the challenge for management. It means targets need choosing carefully, but a strong track record means I think the stock is well worth a look.

Admiral

Admiral Group (LSE:ADM) yields around 4%, and the interim dividend just fell 39% to 70.5p. So should this be on anyone’s radar in September?

A dividend cut looks alarming, but it’s being replaced by a £45m share buyback starting this month. The cash is still being returned to investors, just through a different mechanism.

Next to Legal & General’s 7.6%, a 4% dividend yield looks pretty anaemic. But there’s a big reason why Admiral is my preferred insurer when it comes to investing.

Insurance is only as good as the underwriting behind it. The main challenge is that you can’t reprice a contract once claims turn out more expensive than you imagined. 

That’s a much bigger issue for life insurers, whose policies run for decades. Car insurance resets annually, so a mistake hits profits for one year, not 30.

Admiral also makes fewer mistakes than most. Its operating margins are consistently ahead of the field, even in a softer market. 

That’s due to technology and pricing data, not luck. And in an industry that should endure as long as people drive cars, I think that’s a huge advantage.

Can it eliminate the risk of inflation cutting into profits entirely? Absolutely not. Does it have a long-term advantage over competitors? I think so — and that makes it one for the radar.

Passive income

Dividend stocks remain my number one choice for long-term passive income. But it’s important to pay attention to what’s going on elsewhere in the investing universe.

High bond yields mean dividend investors need to be a bit more selective. For those willing to look, however, I think there are still opportunities worth considering.

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Stephen Wright owns shares in Admiral Group.