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5% dividend yields! 3 dividend shares I’d buy today to make a passive income in 2021

Peter Stephens
·3-min read
Hand holding pound notes
Hand holding pound notes

Many dividend shares have cut their shareholder payouts in the last year. But it is still possible to earn a worthwhile passive income from UK stocks.

After all, not all companies have slashed their shareholder payouts. And many stocks still trade at low prices following the 2020 stock market crash. That means their yields could be relatively attractive.

With that in mind, here are three FTSE 100 shares that have dividend yields in excess of 5% at the present time. They could be a sound means of making an income in 2021 and in the coming years.

Financial services firm and a passive income opportunity

Standard Life Aberdeen still has passive income potential, despite its recent share price rise. The stock is expected to yield 5.2% this year even after its shares have surged higher on the back of a rising stock market.

The business has experienced disruption from coronavirus, but its recent results show that it has adapted successfully. Redemptions over recent months have slowed, while it has continued to drive synergies and invest in digital opportunities. They could strengthen its competitive position through improved customer engagement, which may lead to improving profitability and greater scope for dividend growth in the long run.

A resilient dividend share with growth potential

British American Tobacco could also offer an attractive passive income at the present time. It currently yields around 7.9% from a dividend that is covered 1.5 times by profit. This suggests that it is sustainable, and could rise at an above-inflation pace due to the pricing power inherent in leading tobacco brands.

BAT offers a relatively resilient income opportunity. It has a long track record of raising dividends at a brisk pace. This may prove to be an even more appealing asset to income investors while the world economy struggles to deliver growth. It could increase the appeal of the company’s shares and allow it to deliver capital growth alongside its shareholder payouts.

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An affordable dividend and low share price

Legal & General also offers a passive income well in excess of 5% at the present time. The diversified financial services company is forecast to yield 6.7% in 2021 from a dividend that is due to be covered 1.6 times by profit this year.

As well as its relatively high income return prospects, the company has a price-to-earnings (P/E) ratio of just 9. This suggests that it offers a wide margin of safety that may provide scope for substantial capital returns in the long run. Paper losses cannot be ruled out from Legal & General, or any other stock, in the short run. But its long-term passive income potential seems to be high. As such, now could be the right time to buy it as part of a diverse portfolio of shares.

The post 5% dividend yields! 3 dividend shares I’d buy today to make a passive income in 2021 appeared first on The Motley Fool UK.

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Peter Stephens owns shares of British American Tobacco, Legal & General Group, and Standard Life Aberdeen. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021