UK markets closed
  • NIKKEI 225

    26,296.86
    +131.27 (+0.50%)
     
  • HANG SENG

    26,669.75
    +81.55 (+0.31%)
     
  • CRUDE OIL

    45.64
    +0.73 (+1.63%)
     
  • GOLD FUTURES

    1,806.50
    +1.90 (+0.11%)
     
  • DOW

    29,897.07
    -149.17 (-0.50%)
     
  • BTC-GBP

    14,121.05
    -128.00 (-0.90%)
     
  • CMC Crypto 200

    373.82
    +3.31 (+0.89%)
     
  • ^IXIC

    12,108.28
    +71.50 (+0.59%)
     
  • ^FTAS

    3,607.81
    -25.54 (-0.70%)
     

Why I’d buy these 2 UK dividend shares yielding 10% and 6% today for a passive income

Peter Stephens
·3-min read

Making a passive income from UK dividend shares may be viewed as a risky move by some investors. The recent stock market crash has highlighted the volatility of indexes such as the FTSE 100. The index is currently down over 20% from its 2020 starting price.

However, with interest rates being low, other income-producing assets such as bonds and cash may fail to deliver a sufficient return for investors. Therefore, buying a diverse range of UK shares could be a sound move. It could limit risk and offer a relatively high income return.

With that in mind, here are two FTSE 100 dividend shares that could offer impressive income returns over the long run.

A relatively high passive income

Imperial Brands (LSE: IMB) offers a relatively large passive income opportunity relative to other FTSE 100 shares. It has a forward dividend yield in excess of 10%. This is largely a result of its poor share price performance. The price has fallen by 29% over the last year. In doing so, it has underperformed many other UK shares.

The business is set to unveil a refreshed strategy in the near term under its new management team. This could have an impact on all areas of its operations, including its dividend prospects. However, its double-digit dividend yield suggests that passive income investors may already have factored in the prospect of a further reduction in shareholder payouts.

Looking ahead, Imperial Brands could become a more popular stock among investors due to its defensive characteristics. Political and economic risks are high, which could cause increased risk aversion among investors. The company may also deliver growth through next-generation products over the long run that help to offset a decline in cigarette volumes. This may catalyse its dividend payouts and improve its passive income prospects.

An attractive FTSE 100 dividend prospect

SSE (LSE: SSE) is another UK dividend share that offers a generous passive income at the present time. It currently yields in excess of 6%. That’s 1.3 percentage points higher than the FTSE 100’s dividend yield of 4.7%.

The company’s recent updates have shown that it is making progress with its £7.5bn investment programme. This has the potential to expand SSE’s exposure to renewable energy assets. These are becoming increasingly popular among investors as the world shifts towards a low-carbon economy.

SSE continues to target an appreciation in its dividend payouts that meets inflation. This could become an increasingly attractive strategy for passive income investors, given the amount of monetary policy stimulus that has been enacted. The end result could be higher inflation over the long run.

Of course, other FTSE 100 shares may offer a faster pace of dividend growth than SSE. However, its sound strategy and defensive characteristics could make it a relatively robust passive income opportunity compared to other UK dividend shares.

The post Why I’d buy these 2 UK dividend shares yielding 10% and 6% today for a passive income appeared first on The Motley Fool UK.

More reading

Peter Stephens owns shares of Imperial Brands and SSE. The Motley Fool UK has recommended Imperial Brands. 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 2020