3 UK shares to buy to generate a passive income

Rupert Hargreaves highlights three UK shares to buy to generate a passive income over the long term with a stream of dividends.

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I believe that acquiring equities is one of the easiest ways to generate a passive income. With that in mind, here are three UK shares I’d buy today to add to my portfolio. 

UK shares to buy

In my opinion, one of the best income stocks on the market today is National Grid (LSE: NG). At the time of writing, shares in this utility company support a dividend yield of around 6%. 

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One of the reasons why I like this company so much is its defensive nature. As the electricity network owner in the UK and Wales, National Grid has an unrivalled position in the UK utility market. I think this could underpin its dividend to investors for decades to come. 

That said, the corporation does face challenges. Regulators are starting to clamp down on utilities’ high profits and mixed customer service records. This could impact the group’s growth in the future. National Grid also has to spend a lot maintaining and developing its network. A large storm or other natural disasters could cause significant damage to its assets, which would impact investor returns. 

Still, despite these risks, I’d buy the stock for my passive income portfolio today. 

Passive income from green energy

Another utility business that features on my list of UK shares to buy for a passive income is Greencoat UK Wind  (LSE: UKW). Shares in this wind farm owner and operator currently offer a dividend yield of 5.5%. The payout is supported by income from the group’s growing wind farm assets. 

In recent years, the organisation has been spending heavily to buy up new wind farm assets. This has helped it realise inflation-busting dividend growth every year. 

Of course, there’s no guarantee the firm will be able to continue with this policy. It faces several risks as we advance, including the wave of investment set to enter the wind industry over the next few years. This could lead to excess supply, making it harder for Greencoat to earn a high return on its assets. 

Nonetheless, I’d also buy the stock for income now. 

Telecoms income 

Telecom Plus (LSE: TEP) is a fully-integrated utility, telecoms and insurance provider for homeowners. Its offering has proved popular with consumers over the past 10 years, and earnings per share have grown at a compound annual rate of around 3%. This growth has enabled management to increase the dividend by more than 30% over the past five years. 

One of Telecom Plus’ secret weapons is its customer service. Its Utility Warehouse business has been recommended by the consumer magazine Which every year for the past decade. 

While this is a benefit today, it could also become a risk. If the firm loses its reputation for excellent customer service, clients may start going elsewhere. Higher energy costs and increased regulation are other risks that may impact the group’s long-term potential. 

Despite these challenges, I believe this is one of the best UK shares to buy today for a passive income as it currently offers a yield of 5%. On that basis, I’d buy the stock today.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Greencoat UK Wind. 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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