2 UK shares to buy now with 6% yields

Our writer looks at two FTSE 100 companies with dividends of 6% or more from his list of UK shares to buy now for his portfolio.

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I have been looking at UK shares to buy now for my portfolio. Here are two FTSE 100 companies I would consider, each of which yields of 6% or more.

Legal & General

The first UK dividend share I would consider for my portfolio is Legal & General (LSE: LGEN).

The insurance company has a long history, but it is its future that most excites me. It has developed an approach to making money that tries to appeal to the ESG concerns of some customers. Whether or not that turns out to be the right strategy, I think it shows that the company is not simply resting on its laurels. Meanwhile, its iconic multi-coloured umbrella logo should help it continue to attract and retain customers without the marketing spend needed by a new market entrant.

In the past the company has typically been a good dividend payer. It has set out plans to keep increasing the dividend in coming years. Coupled with a 6.4% yield, that is one of the reasons I rate Legal & General among UK shares to buy now for my portfolio.

The road ahead

However, although I think Legal & General has a bright future, there are still risks. Dividends are never guaranteed. Any underwriting errors could add costs, eating into profits.

Another concern I have about the company is the track record of share price growth. It is up just 2% in the past year and 12% over five years. However, I feel the attractive yield in recent years has compensated for limited capital growth. In addition, the fairly flat share price could actually be an opportunity for me as an investor. It means that Legal & General now has a price-to-earnings ratio of just nine. For a blue chip FTSE 100 member, I find that valuation attractive.

Vodafone

Another company on my list of UK shares to buy now for my portfolio is mobile telecoms giant Vodafone (LSE: VOD).

The company currently offers a 6.1% dividend. Telecoms is a business that often generates high cash flows. With an increasing use of data, I reckon there is a strong growth runway ahead for the well-known brand. Vodafone’s business benefits from being among the leading providers in many markets. While the company is based in the UK and has millions of customers here, it is also a big presence in many European markets. Its strong brand helps build customer loyalty.

UK shares to buy now

Last year, Vodafone earned around 32p per share. That more than covered its dividend of roughly 7.5p per share. But while earnings are strong, free cash flows do not consistently match them. The high cost of capital expenditure to build and maintain telecoms infrastructure remains a risk to the company’s financial health. Its net debt of €44bn remains concerning to me, as paying it off could hurt the company’s ability to fund dividends. The debt-laden company has cut its dividend before, in 2019.

Recognising that risk, I continue to see value in the company’s established business and substantial cash generation ability. I reckon the 6% yield could provide a welcome boost to my passive income streams. So I would consider buying Vodafone for my portfolio.

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.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. 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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