My goal today is to find the best dividend-paying stocks and exchange-traded funds (ETFs) to buy on the London Stock Exchange. Here are three that I would like to acquire for passive income and cash to invest.

REITs

Real estate investment trusts (REITs) can be a great buy for dividend income. In return for certain tax breaks, they must pay out at least 90% of annual rental profits to shareholders.

Supermarket Income REIT (LSE:SUPR) is one such trust on my radar. Its 12-month trailing profitability is as much as 8.3%. For comparison, the average yield per FTSE100 shares lag far behind and amount to 3.6%.

As the name suggests, this real estate offering focuses on the food retail sector. This can have many advantages for investors. Stable demand for edible goods means that rent collections remain high throughout the economic cycle.

In addition, Supermarket Income makes its properties available to immense and financially stable companies such as Tesco AND Sainsbury’s. This ensures visibility of additional profits (and therefore dividends).

The company is susceptible to any changes in interest rates, especially when their level increases. However, with UK inflation falling to a three-year low of 1.7%, this threat appears less grave, at least in the compact and medium term.

Please note that tax treatment depends on each client’s individual situation and may change in the future. The content of this article is for informational purposes only. It is not intended to be and does not constitute any form of tax advice.

ETF fund

With a 12-month trailing yield of 5.7%. iShares Eurodividend UCITS ETF (LSE:IDVY) has recently paid larger dividends than most UK stocks.

The fund invests in 30 companies with the highest rate of return in the euro zone. To give you a taste, some of his largest holdings include a Dutch bank ABN AmroSpanish energy supplier EndesaAND French communications giant Orange.

For the investor, such diversification provides significant benefits. This means that the overall return I earn is not dependent on any one company, industry or geographic location.

This may make it a safer source of passive income than investing in individual stocks. However, given that 58.5% of capital is tied up in shares of financial companies, dividends may still be potentially at risk during an economic downturn.

Still, its huge rate of return and low price-to-earnings (P/E) ratio make it an attractive investment in my opinion. Its earnings multiple is just 8.7 times.

Eurostar

Continuing with the continental theme, I think Schroder European Real Estate Investment Fund (LSE:SERE) could be another great dividend buy. The dividend yield is currently an impressive 7.2%.

It’s another REIT, which means it also has to pay out the lion’s share of its profits as dividends. With economic conditions in the euro zone improving and inflation falling, now may be a good time to consider buying.

Schroder invests primarily in retail, office and industrial properties, which he describes as “winning cities and regions“. We are talking about Berlin, Paris and Hamburg – places with high economic growth, growing population, high employment and good infrastructure. This suggests that its properties may be an excellent long-term investment.

Earnings here could disappoint if euro zone economies experience novel stress. However, the trust’s exposure to different countries and sectors helps reduce risk for investors, making it an attractive company to consider.