I would avoid Lloyds Banking Group and instead consider this stock for passive income

At first glance, Lloyds Banking Group (LSE:LLOY) looks like a great stock for passive income.

With the share price just above 59p, the forward dividend yield is around 5.8% for 2025. Shareholders have had a good time in 2024 so far.

I think it may be due to the general feeling that the economy is improving.

Difficulties with income

However, Lloyds is a cyclical business, and a glance at its financial results over several years reveals uneven performance in terms of profits and cash flow.

I fear that after a period of growth, activity will at some point experience a period of decline. After all, City analysts expect profits to rebound next year after a weaker period in 2024. However, even after the expected increase in 2025, profits will only return to the level reached in 2021.

Are profits really looking good? It could be. But overall, it’s the uncertainty surrounding Lloyds that keeps me away. However, the company and the stock could do well for shareholders over the next few years. If the increasingly favourable general economic conditions we’re seeing persist, Lloyds could prove to be a worthwhile investment.

For me, there are better opportunities to be had. For example, I am passionate about Supermarket Income Real Estate Investment Trust (LSE: SUPR).

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The company is a UK-based real estate investment company that focuses on grocery properties, as the name suggests.

It’s not a stock or a company that makes people’s hearts beat faster, but that’s part of the point. I see the company as operating in a stable, sustainable industry that generates consistent cash flows.

An impressive dividend record

This is exactly what it takes to provide investors with a steady income through dividends. Indeed, the multi-year record here is impressive, with a dividend compound annual growth rate (CAGR) of around 34%.

Real estate investing of course comes with its own risks. We have seen big swings in real estate values ​​over the decades and in that sense it is a cyclical sector, which adds a bit more risk for shareholders.

But Supermarket Income REIT has performed well during the pandemic and maintained its payouts to shareholders, unlike many other companies.

One of the company’s great strengths is that its tenants run businesses with defensive qualities. People need to shop regardless of the economic situation.

In March, the company issued an upbeat outlook statement. Chairman Nick Hewson said the UK grocery sector had shown “strong resilience” to the difficult macroeconomic environment.

The company’s tenants “keep growing”strengthening their financial and operational performance by placing omnichannel supermarkets at the heart of their operations, Hewson said.

We will know more about the company when its annual results are published on September 18.

Meanwhile, with the share price close to 75p, the forward dividend yield for 2025 is around 8%. I think this looks attractive and would do some further research now with a view to owning a few shares for my diversified portfolio.