While the stock market rally has pushed the prices of many UK dividend shares higher, it’s still possible to obtain 4%+ yields from UK stocks.
Compared to other assets in a low interest rate environment, this could prove to be relatively attractive. There may also be scope for dividend growth in an improving economic outlook.
With that in mind, here are two UK shares that could deliver relatively sound income investing prospects over the long run when purchased as part of a diverse portfolio of stocks.
A high yielder among UK dividend shares
While many UK shares have seen their yields decline to low levels in recent months, BP continues to offer a relatively high passive income return. Its 6.5% yield means it could be attractive versus other UK dividend shares.
The company’s latest quarterly update showed it continues to experience challenging operating conditions. Profitability came under severe pressure, which doesn’t strengthen its investment case. However, the prospect of an improving economic outlook could lead to better returns for the business should the price of oil and gas increase.
Furthermore, BP is moving ahead with its plans to invest in renewable forms of energy. This strategy will likely take many years to come to fruition. However, it could produce improving financial returns that are more sustainable than at present. This may have a positive impact on its appeal versus other UK dividend shares. As well as on its capacity to pay a rising dividend in the long run.
Dividend investing appeal in a stock market rally
Another company that could have passive income investing appeal is Standard Life Aberdeen. The company has a relatively high yield versus other UK dividend shares. It has a yield of around 5% that could benefit from an improving outlook for the world economy, since the company’s financial performance is closely tied to the global macroeconomic prospects.
Of course, the company’s recent results showed a decline in revenue amid difficult operating conditions. Should they continue, this could cause a weaker dividend outlook for the business.
However, Standard Life Aberdeen has reported relatively strong investment performance from its funds. Over 68% of its assets under management are above their benchmark in the last three years. Furthermore, it’s making progress in capitalising on digital channels to grow its assets under management. This could have a positive impact on its prospects versus other UK dividend shares.
Building a diverse portfolio of UK shares
Clearly, a portfolio of dividend shares needs to be diverse in order to reduce risk and capitalise on a wider range of growth opportunities. The world economy’s prospects are expected to improve and high yields are still on offer across many UK shares. So there may be opportunities to build a generous and growing passive income in the coming years.
