I like dividends – a lot. The income that a company pays out to me when I own its shares can come in handy for all sorts of uses. That’s why I keep a list of UK dividend shares to buy now for my portfolio.
Here are three UK dividend shares I would consider buying now to boost my income.
Leading retail group
A lot of the discussion in financial circles lately has been about the supermarket group Morrisons. But while bid speculation may have driven the Morrisons share price up, it isn’t the retail chain I would buy today for income. Instead, I would look at its rival, Tesco (LSE: TSCO).
Demand for groceries is fairly resilient. While there can be peaks and troughs — for example, the surge seen in the pandemic — people are always going to need to eat. Many retailers have seen their business models threatened by the Internet. For Tesco, however, an extensive network and brand loyalty have meant that Internet sales have presented an opportunity. Grocery retail can be low margin, but the cash flows are often substantial. That can help support dividends. With a yield of 4.3%, I include Tesco on my list of dividend shares to buy now.
There are risks, though. The company’s online sales have boomed, but incur more costs than in-store sales due to the effort of processing, picking, and delivering them. That could hurt Tesco’s profit margins.
High-yield dividend shares to buy now
I am also considering adding more shares in Imperial Brands to my portfolio. With a yield of 8.8%, Imperial is one of the highest yielding FTSE 100 shares available currently.
Cigarettes are cheap to produce, and the company can profit from selling them at a higher price thanks to its stable of brands such as John Player Special and Davidoff Cigarettes. While cigarette volumes are set to decline in many markets, Imperial reckons it can offset the impact of volume falls by raising prices. It is also focussing on improving its share of sales in its five largest cigarette markets.
Tobacco companies including Imperial face various risks, from a decline in demand to increased regulatory restrictions. That could mean that revenues and profits fall.
The financial services provider M&G is also on my list of dividend shares to buy now.
The company offers services including investment management. Its brand and reputation give it a strong position when it comes to finding new customers. Just like many people don’t switch their bank accounts, a lot of investment management customers often keep the same supplier for years rather than hunting around for alternatives. So I see M&G as having good prospects for years to come.
With a yield of 7.9% and a progressive dividend policy, I like the company for its income potential.
There are risks, though. The pandemic led to a flurry of interest in investing, but that may not continue as people’s lives and expenses return to normal. That could make it harder for M&G to maintain its revenues.
Christopher Ruane owns shares in Imperial Brands. The Motley Fool UK has recommended Imperial Brands, Morrisons, and Tesco. 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.