Buying dividend shares can be a straightforward way to boost one’s passive income streams. Dividends are never guaranteed, however, so diversifying across a range of shares can reduce the impact on my earnings if any one of the companies reduces its payout.
Right now, if I had a spare £9,000 and wanted to set up a passive income stream of around £828 per year, I would aim to do so by splitting the money evenly between the three dividend shares below.
Henderson Far East Income
With China open for global business again, I expect Asia to perform well economically in coming years.
That could be good news for shareholders in Henderson Far East Income (LSE: HFEL) thanks to its focus on the region.
The investment fund owns shares in dozens of holdings that do business in Asia, such as Samsung Electronics, Singapore Telecom and Taiwan Semiconductor Manufacturing. It pays out a juicy annual dividend, with the yield currently standing at 9.7%.
With many economies battling inflation, lower profit margins could hurt income for the investment fund. That could lead to smaller dividends. But I like its strategic focus and think that might help it in coming years.
M&G
Although it is based in the UK, asset manager M&G (LSE: MNG) also offers me international exposure as it has customers in almost 28 markets worldwide.
Asset management can be a lucrative business. The sums involved mean that even modest percentage commissions can soon start adding up. The flipside is a risk that, when economic conditions are weak, investors pulling money from the market eats into profits.
Last year M&G recorded an accounting loss but I think the underlying business remains strong. It has a well-regarded brand and an installed client base running into the millions.
It is also a generous dividend payer. The shares yield 9.8%.
British American Tobacco
The tobacco industry faces long-term declines in cigarette smoking. That is a threat to profits for British American Tobacco (LSE: BATS). Despite that, I own some of these lucrative dividend shares and would happily buy more.
For now, profits and cash flows from cigarettes remain very large. I expect that to remain the case for a long time even though the cigarette business is in steady decline. The addictiveness of nicotine and premium branding help give the Lucky Strike manufacturer pricing power. That helps support the 8.1% dividend yield.
Such brands can also assist the company as it seeks to grow its non-cigarette portfolio. It has been doing that quickly in recent years and I think the long-term future of the business could be determined by the success of such product lines.
Having well-known brands and well-established distribution channels gives British American Tobacco a sizable competitive advantage in doing that compared to new market entrants.
