As decent as the performance FTSE100 so far in 2024, there are still a lot of stocks in the index that are trading at budget-friendly valuations. I would consider buying some of these if I had the funds to do so, especially if my primary goal was to earn passive income.

Buy long term

Rio Tinto (LSE:RIO) is one example. The mining company’s shares are changing hands for just nine times forecast earnings. That’s well below the average on the UK’s top tier, despite being broadly similar to other companies in the sector.

The “discount” isn’t surprising. Demand for the metal has fallen, especially from substantial buyers like China. That means lower profits for those digging up the shiny stuff, and helps explain the 17% drop in prices since early January.

The glowing side is that the drop in sentiment has pushed the dividend yield up to 6.4%. This looks like it will be comfortably covered by expected profit (at least at this stage).

I also have one eye on the long-term outlook. With copper and lithium likely to be in tiny supply as the world transitions to green energy, Rio Tinto could soon find itself in a purple patch. That could mean substantial increases in the amount of money returned to shareholders.

Big dividend action

Throwing all your cash into one business is asking for trouble. For this reason, I would be willing to buy stock in a completely different company, such as Legal and general information (LSE: LGEN). It currently yields a monstrous 9.5%.

Valuation is similarly compelling. The stock is trading at 12 times earnings, falling to nine in FY25.

Now, analysts’ forecasts should be taken with a grain of salt. Any unexpected economic swings will send City residents back to their calculators.

I am also aware that this year’s profit will not cover this stunning dividend. This would be worrying if it continued until 2025.

On the other hand, Legal & General has been remarkably consistent in increasing the amount of cash it sends out since the Great Financial Crisis. So a substantial cut is not a given.

If we add to this the fact that an ageing population is increasingly aware of the need to plan for the future, I believe the benefits far outweigh the risks.

Defensive Demon

A dividend stock I would consider buying is a drug manufacturing company GSK (LSE:GSK).

This may seem like an odd choice. GSK’s yield is “just” 3.8% — significantly lower than the other two stocks. So what’s (really) to like?

Well, that goes back to what I mentioned earlier. Spreading my money across different types of companies will ensure that I’m not left in the lurch if one of them is forced to “change its policy” on dividends — that is, stop paying them!

Since we all get unwell from time to time, pharmaceutical companies are among the most defensive stocks. That also makes a price-to-earnings (P/E) ratio of 10 a potential bargain.

Bringing recent drugs to market isn’t basic or budget-friendly, and failures can affect sentiment for a while. But the opposite is also true. The shingles vaccine Shingrixfor example, has recently been a source of huge profits for GSK.

On top of all this, the above-mentioned rate of return is still higher than what I would get by investing in a fund tracking the FTSE 100 index.