3 UK dividend shares I’d buy in a Stocks and Shares ISA now to make a passive income

These UK dividend shares could offer an impressive passive income in 2021 and beyond. They could be worth buying in a Stocks and Shares ISA.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Buying UK dividend shares in a Stocks and Shares ISA could be a sound means of obtaining a worthwhile passive income in 2021. It is possible to buy high-yielding shares that offer the potential for a rising income over the coming years.

With that in mind, here are three income shares that could offer investment appeal today. Their mix of resilient financial performances, high yields and dividend growth prospects could provide a worthwhile income return during what may prove to be a challenging year for the UK economy.

Making a passive income with UK dividend shares

British American Tobacco’s 8% dividend yield is one of the highest income returns available in the FTSE 100. As well as its generous passive income, the stock is a relatively resilient performer that has raised dividend payouts at a brisk pace for many years. Although cigarette volumes are falling, its plans to reduce leverage and invest in next-generation products could lead to rising profitability and a growing dividend.

Should you invest £1,000 in Unilever right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Unilever made the list?

See the 6 stocks

SSE’s dividend yield of around 5% is not among the highest available from UK shares at the present time. However, it could prove to be a robust means of generating an income as the company’s operations are less likely to be negatively impacted by a tough future for the UK economy. It also plans to raise dividends by at least as much as inflation over the next few years. This could become an increasingly attractive prospect if inflation rises in response to a loose monetary policy.

Vodafone has also shown resilience in the current economic crisis. Its revenue has declined only modestly in recent quarters, which should mean it is able to maintain its dividend and current level of passive income. The stock currently yields over 6%. Its plans to embrace a digital future and the partnerships it has entered into in various markets could provide scope for a rising dividend.

Limiting risks when investing in dividend shares

Of course, any of the above three companies, as well as all others, could experience difficult operating conditions. This may limit their capacity to pay dividends, which could harm an investor’s passive income prospects. This risk is perhaps more acute than it has been for many years due to the uncertain economic outlook. It could negatively impact on the performance of a wide range of companies, and limit their dividend growth capabilities over the coming years.

Therefore, it is crucial to diversify among a large range of companies, sectors and geographies when seeking to make an income from UK shares. Doing so reduces an investor’s reliance on one or more companies, industries and regions to provide dividends. It also means that an income stream is likely to be less prone to ups and downs, which could make budgeting decisions easier in the current climate.

Should you buy Unilever now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of British American Tobacco, SSE, and Vodafone. The Motley Fool UK has no position in any of the shares mentioned. 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

How much do investors need in an ISA to earn a £2,500 monthly passive income?

Charlie Carman explores how investors could strive for £30k in tax-free passive income each year from a dividend stock portfolio.

Read more »

Investing Articles

How much would a 45-year-old need to invest in an ISA to earn a £1k monthly passive income at 65?

Harvey Jones looks at how much an investor would need to put away every month to build a steady passive…

Read more »

Investing Articles

3 things to do ahead of the new 2025-26 ISA year

It's time for us all to put on our investing boots and get to work on developing our plans for…

Read more »

Older couple walking in park
Investing Articles

Is £150,000 enough to generate £1,000 a month in passive income?

Stephen Wright takes a look at three UK stocks with dividend yields above 8% that passive income investors might be…

Read more »

Investing Articles

Aim to earn a £50k second income in retirement by investing just this much each month

Even with a small monthly investment, it’s possible to earn a £50k second income with a successful investment strategy and…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Down 22% in a month! Is this my chance to buy shares in this FTSE 100 outperformer?

Shares in InterContinental Hotels Group have outperformed the FTSE 100 over the long term. So is a chance to buy…

Read more »

Investing Articles

How much would Tesla stock be worth if it was valued like Nvidia?

The market seems to view Tesla as a tech stock rather than a car manufacturer. What could this mean for…

Read more »

Investing Articles

This ex-penny stock skyrocketed 900% in 2020! Is it about to surge again?

This subdued hydrogen penny stock was hot in 2020, but with demand for green hydrogen rising in Europe, can the…

Read more »