2 FTSE 100 dividend shares I might buy for passive income!

I think these FTSE stocks could help supercharge my passive income. Here’s why I’m thinking of adding them to my UK shares portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Here are two FTSE 100 dividend stocks I’m considering buying for my portfolio today. I think they could be terrific sources of long-term passive income.


I’m considering increasing my holdings in UK housebuilding shares. And Persimmon (LSE:PSN) — on account of its 6.4% dividend yield — is near the top of my shopping list.

Investing in these highly cyclical shares is risky as Britain’s economy struggles. A surge in unemployment could cause home sales to fall sharply. So could the impact of additional interest rates hikes to tame inflation.

Yet there are signs that the sell-off of housebuilding shares late last year may have been over the top. As a result snapping up Persimmon stock could be a good dip-buying opportunity.

Recent data shows that the homes market is performing much better than many analysts and economists had forecast. So the profits and dividends at residential property builders could beat all expectations.

Data from Rightmove today showed the average home value rose 0.8% (or nearly £3,000) in March. It added that data “point to a market on a much more stable footing than many anticipated and cautiously transitioning towards the activity levels of the more normal market of 2019.”

As well as that huge dividend yield, Persimmon’s share price carries an undemanding price-to-earnings (P/E) ratio of 10.8 times at current levels. These numbers might make it one of the best FTSE value stocks out there.

United Utilities Group

Water supplier United Utilities Group (LSE:UU.) doesn’t offer the same mighty yield as Persimmon. For the new financial year beginning in April this sits at 4.7%.

But I’m considering buying the utilities business for passive income. Its dividend yield still comfortably beats the 3.7% FTSE 100 average. And what’s more, dividend forecasts here are much more robust than those of other blue-chip shares.

This is thanks to the essential service that companies like United Utilities provide. Regardless of difficulties in the wider economy it can expect profits to continue flowing. It has the means and the confidence to pay above-average dividends year after year.

Its defensive operations also give it a better chance to sustainably grow dividends. The company’s policy under current regulatory rules is to grow payments in line with CPIH (consumer price inflation plus housing costs) through to fiscal 2025.

I must mention that dividends could be at risk if regulators decide to clamp down on shareholder rewards amid rising criticism over utilities’ actions.

Today Ofwat laid down new rules that could limit or even stop investor payouts from going out. It said that “water companies need to take stock of their performance for customers, the environment, and the company’s overall financial health” when deciding on dividends.

However, I believe United Utilities remains in great shape to keep paying decent dividends. It has strong credit ratings of A3 with Moody’s and BBB+ with Standard and Poor’s. The company has also maintained a four-star environmental rating with the Environment Agency.

Like Persimmon, I think the water supplier might be one of the best buys for dividend income.

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.

Royston Wild has positions in Persimmon Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Growth Shares

Growth stock YouGov just fell 46%. Time to buy?

YouGov’s share price just fell from 820p to 440p after a poor trading update. Is now a good time to…

Read more »

Investing Articles

2 mouthwatering FTSE growth stocks I’d buy and hold for 10 years

Growth stocks purchased today could be the gateway to many years of capital growth and returns. Here are two picks…

Read more »

Investing Articles

Can the IAG share price really be as dirt cheap as it looks?

While most shares have recovered since the Covid days, the IAG share price is staying stuck to rock bottom. Surely…

Read more »

Investing Articles

BAE Systems shares are flying! Have I missed the boat?

Sumayya Mansoor looks into whether or not BAE Systems shares are still a good buy for her portfolio after the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

1 heavyweight FTSE 100 share I’d buy as London retakes its crown

Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100…

Read more »

Investing Articles

I’d buy 5,127 National Grid shares to generate £250 of monthly passive income

With a dividend yield of 6.5%, Muhammad Cheema takes a look at how National Grid shares can generate a healthy…

Read more »

Investing Articles

The FTSE 100’s newest member looks like a no-brainer to me!

This Fool explains why she sees the newest member of the FTSE 100 as a great opportunity after its recent…

Read more »

Investing Articles

Empty Stocks and Shares ISA? Here’s how I’d start earning a second income from scratch

Like the thought of earning extra cash tax free? Our writer explains what he'd do to begin earning passive income…

Read more »