I have been looking for cheap shares to buy now to boost my passive income streams. Here are three I am considering at the moment for my portfolio.
In the past year, insurer Direct Line (LSE: DLG) has seen its shares fall by 13%. But from a buy-and-hold perspective, I think the lower share price offers me an attractive entry point for the company. Its 8.4% yield means that if I put in £1,000 today I would hopefully earn £84 in dividends next year.
Last week the company announced a 2.7% increase in its dividend alongside plans to buy back up to £100m of its own shares. I take this as a sign of management confidence in the business performance. Insurance is all about risk, of course, and like all shares these have some risks of their own. For example, a surge in secondhand car prices could make insurance payouts costlier and hurt profits.
But with its red telephone brand and over 14m policies in force, I think Direct Line can continue to benefit from resilient demand in the insurance market. I would consider it among cheap shares to buy now for my ISA.
British American Tobacco
While British American Tobacco (LSE: BATS) is up 13% over the past year, it has fallen 12% in the past month. I do not know if it will keep getting cheaper. But what I do know is that the share yields 7.2% and raised its dividend again this year, as it has done annually for over two decades.
The dividend is supported by large cash flows at the tobacco producer. Last year, it generated £2.5bn of free cash flows even after funding its dividend. Long term there are cash flow risks, though. The company has £36bn of net debt, and paying that off could eat into earnings. Another risk is falling cigarette use, but new products like modern oral and increased pricing on cigarettes could help sustain profitability. That could be good news for future dividends.
Housebuilder Vistry (LSE: VTY) has slid 26% from its highs last year, although in the past year overall the fall has been 6%. That means that the company now trades on a price-to-earnings ratio of 9, while offering a dividend yield of 6%.
Housebuilding is cyclical and there are some risks to profits here, from inflation of material costs and labour to the possibility of a housing market downturn. But the company’s yield means I see Vistry among cheap shares to buy now to boost my income. Given the cyclical nature of housebuilding, I would need to buckle up for the long term. If the property market tumbles, housebuilders could see their share prices deflated for years.
By diversifying across a range of shares, I can reduce my risk though. These three UK shares offer me exposure to different sectors. They also offer my portfolio an average dividend yield of over 7%.