Despite the recent stock market rally, a wide range of UK shares offer generous passive incomes. Furthermore, in many cases, they trade at cheap prices. That suggest they can deliver impressive capital returns in the coming years.
Of course, making a desirable income from assets other than equities is a tough prospect right now. Low interest rates mean cash and bonds face periods of poor returns.
As such, the increasing popularity of dividend-paying stocks could make these five companies increasingly in-demand in 2021 and in the coming years.
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High yields from UK shares displaying resilient performances
Although many UK shares have experienced tough operating conditions this year, companies such as Vodafone and SSE have recorded relatively robust financial performances. This could make them increasingly attractive from a passive income perspective. Certainly since their dividends may be more resilient than is the case for other FTSE 100 stocks.
Moreover, the two companies have dividend yields that are around 6%. That’s over 50% higher than the FTSE 100’s dividend yield. This also suggests they can make a positive impact on an investor’s income in 2021. Furthermore, Vodafone’s improving customer loyalty and investment in digital aspects of its business, as well as SSE’s investment in renewable assets, may mean they deliver impressive financial performances in the coming years.
Sound strategies to generate improving passive incomes
Other UK shares have strategies that could lead to improving passive income prospects for their investors in 2021. For example, British American Tobacco is investing in non-combustible products, such as e-cigarettes. They’re becoming an increasingly important part of its business. So they may enable it to capitalise on changing consumer trends in response to declining cigarette volumes.
Similarly, Taylor Wimpey’s capital raising this year allowed it to invest in land at attractive prices. This may mean it has a stronger market position relative to its peers, and may have a more prosperous long-term financial outlook. Certainly, its 4% dividend yield lags other FTSE 100 stocks such as British American Tobacco, which has a 7.8% dividend yield. However, its recent updates have shown resilient demand for new homes that could continue into 2021.
A solid market position for 2021
Tesco could also offer an attractive passive income relative to other UK shares. The company yields 3.9% and has the capacity to raise dividends at a fast pace. This is because of its forecast 28% rise in net profit next year. That’s down to its dominant online presence likely to provide greater scope for profitability as consumers switch their spending habits to digital avenues.
As with all stocks, the Tesco share price could come under pressure in the short run due to a weak UK economic outlook. However, its dividend seems to be very affordable, and could rise in 2021 and in the coming years.
