Stock market

5 Dividend Shares I’d Buy Today for Passive Income

Image source: Getty Images

A common way to get passive income is to buy dividend shares in a blue chip. FTSE 100 Companies

If I buy shares in a company. TescoEvery time it pays a dividend, I get paid for each share I own.

Imagine I bought 100 shares, for example. This will cost me around £311 at current prices (ignoring fees and commissions, which I will try to manage carefully through my choice of share dealing account).

Calculating the dividend yield

Currently, Tesco is paying two dividends a year totaling 12.1p per share. If it maintains this level of payout, my 100 shares should earn me £12.10 in annual dividends. £12.10 is 3.9% of the purchase cost of £311, so we say Tesco’s dividend yield is 3.9%.

Profits are never guaranteed though. Tesco has canceled its payments in the past, when the business has fallen on hard times.

On top of that, although 3.9% is close to the average FTSE 100 yield, some dividend shares offer significantly higher yields. If those yields are sustainable, it could be a good way for me to grow my passive income stream.

With passive income as my goal, here are a handful of FTSE 100 shares I’d be happy to buy for my portfolio today if I had the extra cash to invest.

Slow but profitable

Currently, the most profitable shares in the London market are in the financial services sector. In some people’s opinion this is not an interesting business field, but it can be profitable.

For example, I will gladly buy. Legal and General With its 8.1% yield and 10.6% yield Phoenix.

Both firms are poised to capitalize on long-term high demand for retirement-related financial services products. Both benefit from strong brands (Phoenix owns the rights to the Standard Life brand).

Another company with a strong brand and large customer base that I would happily buy more shares in (I already own a share). M&GWith its 9.8% yield.

What about the risks?

A downturn in the market could hurt the trio, if it sees clients pull funds. Phoenix’s mortgage book could be negatively affected by a property crash. The growing legal and general focus on ESG investing may turn off some investors (though perhaps attract others). Still, I’d be happy to own all three dividend shares.

Customer focus

I will also increase my holding. British American Tobacco. Despite the decline, cigarette sales are still large. The 9.6% profit share could also benefit from increased demand for non-cigarette products such as vapes.

The fifth dividend share is another one I already own: Vodafone (LSE: VOD).

Vodafone plans to halve its profits. But since it has a yield of 9.9%, that could mean the payout is substantial even after deductions.

The company’s balance sheet worries me. Its debt service eats into profits. But asset sales and profit cuts could help accelerate debt reduction.

Its market is vast and Vodafone has a strong position in many countries in Europe and Africa. I expect the demand for data and mobile services to increase over time. I also like Vodafone’s exposure to emerging markets in Africa and see its mobile money offering as an exciting growth opportunity there.

A well-known brand, large customer base and pricing power are all in its favor.

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button