Despite inflation concerns and the US tech crash, the FTSE 100 has risen 5.2% over the last six months. I think it is a good time to look at some UK dividend options to bolster my passive income portfolio. Although dividend payouts will not make me rich overnight, they could help fund my bills, which could increase by 7% come April.
Here I have picked two FTSE 100 shares from my watchlist as passive income plays with growth potential as well.
Real estate share with 9.5%+ yield!
Persimmon (LSE:PSN) is an FTSE 100 stalwart with a valuation of £7.8bn. And with the cyclical housing industry going through a period of high demand, the housebuilder’s business looks healthy right now.
Persimmon enjoyed a strong year financially. The full-year trading update showed a total group revenue of £3.61bn of which £3.45bn was from new home sales. The company operated with a margin of 28% across 2021. This was supported by the 3% increase in the average house prices in the UK.
Persimmon was able to navigate most supply chain disturbances and kept raw material and construction costs close to pre-pandemic levels while increasing home deliveries by 7% to 14,551 homes in 2021. The dividend yield was kept stable last year and could increase in the coming months if strong performances continue. To me, this is a sign of a healthy business capable of navigating very choppy waters.
However, the Bank of England (BoE) has already raised its base interest rates twice in 2022. The additional borrowing costs could put off new buyers, which is worrisome. As a result, the Persimmon share price is down 15.3% in the last six months.
But I think the current demand, Persimmon’s strong market position, and yield make it one of the best dividend stocks for my portfolio right now. I think the FTSE 100 company can add stability and value to my passive income portfolio over the next decade.
Insured income?
British insurer M&G (LSE:MNG) is my second FTSE 100 passive income pick right now. The company has been vocal about its focus on increasing its already huge yield of 8.5% every year.
Since its split from Prudential in 2019, M&G has been on an acquisition run. In fact, news broke today that the insurer will acquire investment manager TCF Investment to become a provider of model portfolio services that will help investors assess risk levels easier.
M&G’s half-yearly results (ended 30 June 2021) showed a marked growth in assets under management (AUM) that currently stands at £89.7bn. The revenue generated from subscriptions and transaction fees stood at £327m, up 6% compared to H1 2020.
The British insurance market is extremely competitive and M&G has a relatively small market share compared to giants like Legal & General. Also, the company posted a post-tax loss of £248m, attributed to fluctuations in the value of its assets.
However, this was offset by returns from its AUM wing, which put the business in a positive cash flow of £869m, on track to reach its target of £2.2bn by December 2022. I think this is a strong sign that dividends will increase if targets are met this year. And this is why I am considering this FTSE 100 share for my long-term passive income portfolio in 2022.
