Making a passive income has become more challenging following the stock market crash. Uncertain operating conditions have caused many FTSE 100 and FTSE 250 businesses to reduce their shareholder payouts. As such, there is less choice available for income investors.
However, there are still a sufficient number of dividend-paying UK shares to build a worthwhile income portfolio. Here are two prime examples of stocks that have maintained their shareholder payouts. They could be worth buying and holding for the long run while they offer wide margins of safety.
A resilient performance despite the stock market crash
Rio Tinto (LSE: RIO) may not be an obvious choice for investors seeking to make a passive income. The FTSE 100 mining company has historically been a volatile stock to own, owing to the volatile nature of commodity markets.
However, it has delivered a relatively resilient financial performance in 2020. For example, its half-year results showed that it is on track to meet production guidance for the full year. Despite some disruption, all of its assets have continued to operate. This has delivered robust profitability and cash flow that suggests the business is in a strong position.
While Rio Tinto’s share price has moved 4% higher this year, it continues to offer an attractive passive income. Its dividend yield currently stands at 6.6%. Clearly, its operating outlook is uncertain and recent management changes may mean a period of instability is ahead. However, its solid asset base and the prospect of an improving global economic outlook mean that it could be a worthwhile purchase within a diverse portfolio of income shares.
A long-term passive income prospect
SSE (LSE: SSE) is another FTSE 100 share that could deliver an attractive passive income in the long run. The company’s recent trading update highlighted that it has maintained its dividend growth plan that could see its shareholder payouts rise by at least as much as inflation over the next few years.
The company’s plan to invest heavily in low-carbon assets could pay off over the coming years. This year has arguably seen a quickening in the shift towards a greener economy, which could mean that SSE is in a good position to deliver improving profitability.
Of course, its short-term financial performance continues to be dependent on known unknowns such as weather conditions. However, over the long run it appears to have the capacity to generate positive profit growth as it moves ahead with its investment programme.
With its shares currently having a dividend yield of 6.3%, they appear to offer a relatively attractive passive income versus other UK shares. As such, now could be the right time to buy them as part of a diverse portfolio of stocks that can produce a rising dividend stream over the coming years.
Peter Stephens owns shares of Rio Tinto and SSE. 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.