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Stock market rally: 2 UK dividend shares I’d buy now to make a passive income

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While many UK dividend shares have risen in price in the stock market rally, it’s still possible to obtain relatively attractive yields from across the FTSE 100.

Certainly, the stock market faces a period of greater uncertainty at the present time. However, this risk may be offset to some extent by the potential rewards that are available from dividend stocks compared to some other mainstream income-producing assets such as bonds.

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With that in mind, here are two UK stocks that could offer a worthwhile passive income over the coming years.

A high-yielding stock among UK dividend shares

With a yield of 6.4%, Vodafone (LSE: VOD) is one of the highest-yielding companies among UK dividend shares at the present time. This is despite the company reducing its dividend in the last few years in order to improve its financial situation and aid its growth prospects.

Recent company updates have shown a relatively resilient performance from the telecoms company. Its plans to improve customer loyalty and implement digital growth opportunities seem to be working well. They could catalyse its financial performance and increase dividends.

Clearly, Vodafone faces tough operating conditions alongside many UK dividend shares that may harm its dividend prospects. Similarly, a weak economic outlook could mean it has heightened risks at the present time. However, its high yield and what appears to be a sound strategy could lead to a generous passive income in the long run.

Dividend growth potential over the long run

Unilever (LSE: ULVR) has a relatively low yield compared to other UK dividend shares at the present time. The FTSE 100 consumer goods stock has a dividend yield of 3.5%, which is covered 1.5 times by net profit. This suggests it’s relatively sustainable at its current level, And that could be beneficial, given the uncertain outlook currently facing the world economy.

Of course, Unilever faces tough operating conditions. Sales have underperformed previous expectations in its latest updates. That’s due to lockdown measures reducing its scope for sales growth in many sectors and regions. These challenges could remain in place for many months.

However, Unilever has a long track record of profit and dividend growth, as well as a strong position in many key markets. That means the company could offer a favourable risk/reward opportunity versus other UK dividend shares over the long run.

Building a diverse portfolio

Clearly, it takes more than two UK dividend shares to build a passive income portfolio. Diversification is likely to be of even greater importance at the present time as a result of the risks facing the world economy.

A variety of stocks within a portfolio may offer a more robust passive income that has a greater chance of being resilient. They may also have the ability to grow in a potential global economic recovery over the long term.

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Peter Stephens owns shares of Unilever and Vodafone. The Motley Fool UK has recommended Unilever. 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.

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