Low interest rates have made obtaining a passive income even more difficult than it has been over recent years. Fortunately, a wide range of FTSE 350 shares currently offer high yields that could grow in the coming years.
Buying a diverse range of them may provide a resilient income return during what is likely to be a challenging period for the economy.
With that in mind, here are three UK stocks that I think could be among the best shares to buy now to make an income in 2021, and over the long run.
Obtaining generous passive incomes
GSK’s 5.8% dividend yield makes it one of the higher-yielding shares in the FTSE 100. However, it offers more than just a passive income. The company’s pipeline could positively impact on its financial performance. This has been relatively robust during recent economic challenges. The company’s planned restructuring could produce greater efficiency in the long run that allows for dividend growth after a lack of improvement in this area over recent years.
National Grid is another FTSE 100 stock with a high yield. Its yield of 5.7% is relatively high compared to its historic average. It suggests that investor sentiment towards the utility company is relatively weak. Yes, it faces the prospect of regulatory change it has a business model that is relatively uncorrelated to the performance of the economy. Its defensive characteristics and stable dividend could become more attractive should the economic outlook deteriorate.
Imperial Brands is another stock that offers a generous passive income at the present time. It yields over 8% from a dividend that is forecast to be covered 1.9 times by net profit this year. Certainly, the company is in the midst of a period of change under a new management team that is likely to shift its focus further towards next-generation products. Yes, this may cause some uncertainty in the short run. But it may lead to improving dividend prospects in the long run.
Building an income portfolio
Of course, obtaining a resilient passive income requires more than just a handful of stocks in a portfolio. Diversifying across a wide range of businesses from different sectors helps to reduce company-specific risk. This is the threat of poor performance from one company affecting the entire portfolio. As such, a diversified portfolio is more likely to offer a robust income return in the long run.
The FTSE 350 contains many companies that have a potent mix of high yields and strong track records of growing dividends. And there are opportunities for income-seeking investors to overcome challenges such as low interest rates. By adopting a long-term view of holdings, it is possible to enjoy a potent mix. That potentially means high yields, growing dividends and capital growth in a likely stock market rally as the economic outlook for the UK improves.
Peter Stephens owns shares of GlaxoSmithKline and Imperial Brands. The Motley Fool UK has recommended GlaxoSmithKline and Imperial Brands. 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.