Making a passive income from UK shares has become more challenging in 2020. Many FTSE 100 and FTSE 250 companies have reduced or postponed their dividends due to difficult trading conditions.
However, it’s still possible to build a portfolio of income stocks at the present time. It could offer a growing income over the long run as the world economy recovers.
With that in mind, here are two UK dividend shares that could be worth buying in an ISA today. They may produce impressive total returns in the coming years.
A growing passive income
AstraZeneca (LSE: AZN) hasn’t been a particularly attractive stock through which to generate a passive income in recent years. Its dividends have failed to rise on a per share basis as a result of falling sales due to the ending of patents on key drugs.
However, the company’s recent performance shows that it could now deliver a rising dividend in the long run. For example, its first-half results showed a 14% rise in sales. There was also an increase in core earnings of 26%. That came as investment in its product pipeline has begun to positively impact on its financial performance.
Looking ahead, AstraZeneca is expected to deliver a 27% rise in net profit next year. It trades on a price-to-earnings growth (PEG) ratio of around 0.9. That suggests it offers capital growth potential as well as the prospect of a rising passive income in the coming years.
Improving operating conditions
Polymetal (LSE: POLY) is another FTSE 100 dividend stock that could offer a sound means of generating a growing passive income. The gold miner has enjoyed strong operating conditions this year, with the precious metal’s price increasing by around 25% in 2020.
This contributed to a 98% rise in the company’s underlying profitability in the first half of the year. Its bottom line benefitted from a 21% increase in sales, while it was able to reduce total cash costs by 4%. It also increased capital expenditure by 31%, with its development programme currently on track.
Polymetal currently has a dividend yield of 6.3%. It’s forecast to raise dividends per share next year so that it has a forward yield of almost 9%. While this is clearly dependent on the gold price, the company’s yield suggests it has a wide margin of safety. And that could prove to be a worthwhile passive income investing opportunity.
Buying income shares in an ISA
Of course, buying stocks such as AstraZeneca and Polymetal in an ISA could be a sound means of making a passive income. ISAs offer significant flexibility in terms of penalty-free withdrawals alongside their tax advantages.
While the economic outlook remains uncertain, building a portfolio of UK dividend shares could be a means of obtaining a worthwhile income in the coming years.
Peter Stephens owns shares of AstraZeneca. 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.