3 UK shares I’d buy for a passive income

This Fool takes a look at three UK shares he’s planning to buy for his passive income portfolio, based on their dividend credentials.

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I firmly believe buying UK shares is one of the best ways to generate a passive income. With that in mind, here are three UK shares I’d buy for my passive income portfolio today.

UK shares to buy 

Before I begin, I should note that one of the big drawbacks of buying shares for income is that dividends are never guaranteed. There’s always going to be a risk that companies might have to cut their payouts to investors if profits fall.

That’s just what happened at the height of the pandemic last year. When company profits collapsed, many businesses eliminated their shareholder payouts. 

As such, I’ll only include companies in my portfolio that have strong balance sheets, wide profit margins, and competitive advantages.

While it’s never going to be possible to remove the risk of being subject to a dividend cut entirely, I believe I can improve my odds by focusing on the market’s best income stocks. 

And I believe two of the market’s best income stocks are Assura (LSE: AGR) and Primary Health Properties (LSE: PHP). 

Both own and manage healthcare facilities. This has to be one of the country’s most defensive industries. There’ll always be a need for healthcare in the UK, and sector professionals can’t just operate from any building. They need the proper facilities, and this is where Primary Health and Assura come into play. 

In my opinion, the defensive nature of the healthcare industry means both firms fit my dividend criteria. That’s why I’d buy both for a passive income today. Assura currently supports a dividend yield of 3.8%, and Primary Health yields 3.9%. 

These UK shares appear to be good income investments, but they’re not risk-free. There’s always going to be a risk that the government might take over these facilities and bring management in house. That would leave Both Assura and Primary Health with no income. If interest rates rise, these firms may also face higher borrowing costs, which could also curb shareholders returns. 

Despite these risks, I’d buy both UK shares for my passive income portfolio right now. 

Passive income buy 

The other company I’d buy for my passive income portfolio is Moneysupermarket.com (LSE: MONY). This one of the UK’s top tech companies. It’s revolutionised the market for financial services in the UK, giving consumers a vast amount of power.

In times of economic turmoil, consumers tend to spend more time shopping around for better deals. That could benefit Moneysupermarket. 

The company may also benefit from the economic recovery. If the recovery results in higher wages for consumers, they may be willing to spend more on services like pet and life insurance. There may also be a higher demand for borrowing, which Moneysupermarket can help with. 

The main risk the company may have to deal with is the possibility of additional regulation. This could restrict the services it’s allowed to offer to customers, and that would hurt profits. Moreover, if profits decline, Moneysupermarket may have to cut its dividend. 

Nevertheless, with the above tailwinds, I think it has a bright outlook. That’s why I’d add it to my portfolio of UK shares for a passive income. At the time of writing, the stock offers a yield of 4.2%. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Moneysupermarket.com and Primary Health Properties. 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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