Some of the dividend yields on offer in the UK stock market at the moment are very tempting to me. I think that investing now and holding shares for the long term could help me build significant passive income streams. I have been making a list of shares to buy in the coming month if I have money to invest. Here are two, which both yield at least 6%.
European Assets Trust
It may seem odd to be considering the income potential of a share that saw a big dividend cut recently. But that is what I am doing.
The share in question is European Assets Trust (LSE: EAT). It invests in small and medium-sized companies on the Continent.
At the moment the yield on offer is 6.3%. I already find that sufficiently attractive as a potential income stream. But the cut is what interests me most. It came about because the trust sets its annual payout based on the net asset values of its holdings at the end of the year.
So if European shares rally, this year or later, I expect the dividend to be increased again. If the dividend reaches last year’s level again, the yield at today’s share price would be 9.5%.
Europe is struggling economically, though. That could lead to another dividend cut and it may also mean that the European Assets Trust share price falls from here.
But I remain bullish on the medium- to long-term economic outlook in countries like Germany and think the trust is well-positioned to benefit from it.
British American Tobacco
I already own a stake in British American Tobacco (LSE: BATS). But if the share price keeps sliding as it has done recently, I would be happy to expand my holding in the coming month. Even at the current price I see these as shares to buy for my portfolio if I have spare cash.
Over the past year, the shares have fallen 12%. They are down 34% over a five-year period. But British American Tobacco has been growing, despite falling demand for cigarettes. Over the past three years, revenues grew 7%, earnings per share were up 17% and the dividend per share increased 7%.
Net debt is high, though, at nearly £40bn. That could weigh on profits. Declining cigarette sales are a key risk — although the company has expanded its non-cigarette sales quickly, this remains loss-making. Breakeven is expected next year but I doubt profit margins will match those of cigarettes.
The recent share price fall means British American Tobacco now yields 7.9%. The FTSE 100 stalwart has raised its dividend annually for over two decades. It has a progressive dividend policy, although in practice that is never guaranteed.
I regularly receive passive income from British American Tobacco — and would gladly receive more! That is why the company is on my list of shares to buy in coming weeks.
