Making a passive income has unquestionably become more difficult in 2020. Many UK shares have cut their shareholder payouts in response to difficult operating conditions. Meanwhile, low interest rates and high property prices have negatively impacted on yields among mainstream assets such as cash, bonds and buy-to-let property.
With that in mind, here are five FTSE 100 shares that all offer dividend yields of 6% or more. They could be a good starting point to make a worthwhile income return in 2021. They may even deliver impressive capital returns over the long run.
Passive income opportunities among tobacco stocks
Tobacco stocks Imperial Brands and British American Tobacco have been popular UK shares for passive income investors in the past. However, falling cigarette volumes have caused declining investor sentiment towards the sector.
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As a result, Imperial Brands has a dividend yield of 9%, even after reducing its dividend. British American Tobacco has a yield of around 7.5%. That makes them two of the highest-yielding shares in the FTSE 100.
Since they’re both investing heavily in next-generation products such as e-cigarettes and have the capacity to raise cigarette prices to deliver profit growth, they could prove to be resilient income investing opportunities for 2021.
High dividend yields relative to other UK shares
Vodafone and SSE also appear to offer attractive passive income prospects for 2021 compared to other UK shares. The two stocks are expected to yield slightly more than 6% next year. This, alongside their long track records of dividend payouts, could make them increasingly popular among income investors.
Vodafone recently reported a robust performance despite challenging operating conditions in many of its key markets. Similarly, SSE’s investment in renewables could lead to higher profitability over the long run. This would allow it to maintain plans to raise dividends by at least as much as inflation each year.
As such, both companies could provide a high dividend yield in 2021, as well as scope for growth in shareholder payouts over the coming years.
Improving prospects in a recovering global economy
BHP may not be an obvious choice among UK shares for passive income investors. Its performance is closely linked to commodity prices, which could be volatile next year due to an uncertain global economic outlook. This could make it a relatively risky option.
However, the company is forecast to yield around 6% next year. Furthermore, it has a solid financial position and a diverse asset base that may reduce risks. Moreover, it has a low cost base relative to many rivals. This may provide it with a solid foundation for profit growth.
BHP could be among those FTSE 100 companies that benefit to the greatest extent from a likely economic recovery. Therefore, it could produce impressive capital gains alongside a passive income in the coming years.
