3 of the best shares I’d buy now in an ISA to make a passive income

These three companies could offer a generous passive income in 2021 and beyond. They could be among the best income shares to buy now.

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.

Low interest rates have made obtaining a passive income even more difficult than it has been over recent years. Fortunately, a wide range of FTSE 350 shares currently offer high yields that could grow in the coming years.

Buying a diverse range of them may provide a resilient income return during what is likely to be a challenging period for the economy.

With that in mind, here are three UK stocks that I think could be among the best shares to buy now to make an income in 2021, and over the long run.

Obtaining generous passive incomes

GSK’s 5.8% dividend yield makes it one of the higher-yielding shares in the FTSE 100. However, it offers more than just a passive income. The company’s pipeline could positively impact on its financial performance. This has been relatively robust during recent economic challenges. The company’s planned restructuring could produce greater efficiency in the long run that allows for dividend growth after a lack of improvement in this area over recent years.

National Grid is another FTSE 100 stock with a high yield. Its yield of 5.7% is relatively high compared to its historic average. It suggests that investor sentiment towards the utility company is relatively weak. Yes, it faces the prospect of regulatory change it has a business model that is relatively uncorrelated to the performance of the economy. Its defensive characteristics and stable dividend could become more attractive should the economic outlook deteriorate.

Imperial Brands is another stock that offers a generous passive income at the present time. It yields over 8% from a dividend that is forecast to be covered 1.9 times by net profit this year. Certainly, the company is in the midst of a period of change under a new management team that is likely to shift its focus further towards next-generation products. Yes, this may cause some uncertainty in the short run. But it may lead to improving dividend prospects in the long run.

Building an income portfolio

Of course, obtaining a resilient passive income requires more than just a handful of stocks in a portfolio. Diversifying across a wide range of businesses from different sectors helps to reduce company-specific risk. This is the threat of poor performance from one company affecting the entire portfolio. As such, a diversified portfolio is more likely to offer a robust income return in the long run.

The FTSE 350 contains many companies that have a potent mix of high yields and strong track records of growing dividends. And there are opportunities for income-seeking investors to overcome challenges such as low interest rates. By adopting a long-term view of holdings, it is possible to enjoy a potent mix. That potentially means high yields, growing dividends and capital growth in a likely stock market rally as the economic outlook for the UK improves.

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 GlaxoSmithKline and Imperial Brands. The Motley Fool UK has recommended GlaxoSmithKline and Imperial Brands. 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.

More on Investing Articles

Closeup of "interest rates" text in a newspaper
Investing Articles

Here’s why 2025 could give investors a second chance at a once-in-a-decade passive income opportunity

Could inflation hold up interest rates in 2025 and give income investors a second opportunity to buy Unilever shares with…

Read more »

Investing Articles

As analysts cut price targets for Lloyds shares, should I be greedy when others are fearful?

As Citigroup and Goldman Sachs cut their price targets for Lloyds shares, Stephen Wright thinks the bank’s biggest long-term advantage…

Read more »

Investing Articles

Is passive income possible from just £5 a day? Here’s one way to try

We don't need to be rich to invest for passive income. Using the miracle of compounding, we can aim to…

Read more »

Middle-aged black male working at home desk
Investing Articles

If an investor put £20k into the FTSE All-Share a decade ago, here’s what they’d have today!

On average, the FTSE All-Share has delivered a mid-single-digit annual return since 2014. What does the future hold for this…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

One FTSE 100 stock I plan to buy hand over fist in 2025

With strong buy ratings and impressive growth, this FTSE 100 could soar in 2025. Here’s why Mark Hartley plans to…

Read more »

Investing For Beginners

If a savvy investor puts £700 a month into an ISA, here’s what they could have by 2030

With regular ISA contributions and a sound investment strategy, one can potentially build up a lot of money over the…

Read more »

artificial intelligence investing algorithms
Investing Articles

2 top FTSE investment trusts to consider for the artificial intelligence (AI) revolution

Thinking about getting more portfolio exposure to AI in 2025? Here's a pair of high-quality FTSE investment trusts to consider.

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Do I need to know how Palantir’s tech works to consider buying the shares?

Warren Buffett doesn’t know how an iPhone works. So why should investors need to understand how the AI behind Palantir…

Read more »