Owning dividend shares can be a useful source of passive income. In my Stocks and Shares ISA I own a number of shares I think have strong long-term dividend potential.
Some shares not only offer good long-term income potential but also have juicy dividend yields right now. Here are three such shares each yielding at least 7% that I think investors should consider for their Stocks and Shares ISA.
Legal & General
The FTSE 100 financial services firm Legal & General (LSE: LGEN) has been disappointing in some ways to shareholders in recent years. The share price has fallen 24% over the past five years.
Should you invest £1,000 in BP 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 BP made the list?
Looking at the dividend side of the equation though, things have been better. The company has raised its dividend per share in four of those five years and kept it steady in the other one. A growing dividend combined with falling share price means that Legal & General now yields 8.9%.
With a strong brand, large customer base and proven business model all go in the company’s favour in my view.
One concern I have is earnings resilience. Profits have fallen in the past couple of years and any sudden stock market reversal could lead policyholders to pull funds, damaging earnings further. But as a long-term investor, I think the long-established firm offers me strong future income prospects.
British American Tobacco
The demand for cigarettes is in decline. That is a key risk for British American Tobacco (LSE: BATS), as the company still makes most of its money selling death sticks.
Still, while cigarette sales may be falling, they remain substantial – and highly profitable. With a host of premium brands in its portfolio, such as Lucky Strike, British American is able to command premium prices in markets globally.
That is good for its ability to generate free cash flow, which in turn helps support its 7.9% dividend yield.
Non-cigarette products such as vapes are seeing sales growth. British American Tobacco has raised its dividend per share annually for over 20 years and I think its income prospects still look bright.
Aviva
Insurer Aviva (LSE: AV) is another big dividend payer in the FTSE 100 and its yield currently stands at 7.2%. Even with £5k in a Stocks and Shares ISA invested at that yield, the annual dividends ought to add up to £360.
Since a big cut to the dividend per share in 2020, Aviva has been growing the payout annually. With a strong stable of brands, long underwriting experience and strategic focus on growing its share of the UK market, I think that may continue. Its plan to take over Direct Line could help that.
Then again, Direct Line has had a troubled few years. If its business turns out to be in worse shape than expected, or integrating it is harder, that could be bad news for Aviva.
However, taking risks is part of aiming to earn rewards and I think the logic for Aviva to buy out its smaller rival is strong.
