The Motley Fool

The best shares to buy now for a passive income

A woman works at an IWG location
Image: IWG

I think some of the best shares to buy right now are income stocks. Income stocks, in particular FTSE 100 income stocks, can help me generate a passive income on my investment portfolio.

That said, I should note that as dividends are paid out of business profits, they’re never guaranteed. If a company’s profits suddenly plunge, management may have to cut the dividend. That’s precisely what happened last year as the pandemic decimated corporate earnings right around the world. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Considering this risk, I plan to focus on finding companies that appear to have sustainable dividend payouts. This means I’ll be looking for equities with a high level of dividend cover as well as a strong balance sheet.

Best shares to buy now

One example is the tobacco giant British American Tobacco. With a dividend yield of 8%, at the time of writing, this stock is certainly an income champion. The payout is covered 1.5 times by earnings per share, and its management is focused on keeping debt low.

While I’d buy this company for my passive income portfolio, I realise not all investors may think this is one of the best shares to buy now, due to its exposure to the tobacco industry.

Another stock I’d buy is Telecom Plus. This broadband-to-electricity supplier is one of the country’s largest utility groups. With energy prices set to rise this year and beyond, I believe the company can use its scale to attract new users.

Users receive a discount on their gas and electricity if they sign up for the company’s other services, such as broadband and mobile. This could be particularly helpful in a high-cost environment.

With a dividend yield of 5.6%, at the time of writing, I think this is one of the best shares to buy now for income and growth. Challenges the company may face include additional regulations which could increase costs and reduce profit margins. 

Passive income from water

The utility sector’s one of the best for passive income investments, in my opinion. One of the best shares to buy now in this industry is United Utilities. I’d buy this stock for my portfolio for its 4.1% yield. 

Over the past decade, the firm’s achieved an impressive track-record, inflation-linked dividend growth. Past performance should never be used as a guide to future potential, but United should be able to continue to grow its payout as it’s allowed to raise consumer prices in line with inflation every year. 

That said, one challenge the company may face is regulatory issues. Regulators could reduce the amount of profit the group is allowed to earn. This could force management to cut the payout. Despite this risk, I’d buy the shares for my passive income portfolio today. 

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

Rupert Hargreaves owns shares of British American Tobacco. The Motley Fool UK has recommended British American Tobacco. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.