3 of The Best UK Shares To Buy Now For Income

Last Updated August 20th 2021
5 Min Read

The FTSE 100 has lots of stocks that pay a dividend of 5% or more. Investing in any of these stocks is an amazing way to earn a passive income, and grow an equities portfolio.

The best thing about such stocks is that the dividends can be reinvested. Through this process of compounding, one can grow wealth significantly in the equity markets.

That said, here are three of the best stocks to buy now and enjoy high dividend yields.

3 of The Best UK Shares To Buy Now For Income

  1. British American Tabacco
  2. Phoenix Group Holdings
  3. Persimmon

1. British American Tobacco

A top tobacco company

British American Tobacco (BATS) has been a top dividend payer for years now. It currently has a dividend yield of 7.64%.

Looking forward, this company’s fundamentals look pretty good, and it could be a top dividend payer going into the future.

One of the biggest fundamental pointers to BAT’s good prospects is insider buying. Insiders usually have a better understanding of a company than anyone else. Therefore, their buying or selling is of significance to investors.

In the case of BAT, insiders have been buying over the past year. Recently, one of the company’s non-executive directors increased their holdings in the company by 102%.

This is a big deal, and an indicator that the director is extremely bullish on this stock. Another big purchase in the course of the year was by Board Chairman, Luc Jobin, who purchased GBP 1.2 million worth of shares.  It is also noteworthy that in that period, none of the insiders sold.

Besides insider buying, BAT has had some good news recently. In early August, the company won a patent infringement case against Altria.

This means Altria will not expand its e-cigarettes activities in the US, a move that could boost BAT’s market share.

In recent months, e-cigarettes have become a key component of BAT’s total revenues. The company recently reported in the first half of 2021, revenues from this market segment grew by 59%.

The company also announced that it has put in billions of dollars to develop low-risk products like Vuse e-cig and Glo heated tobacco.

These are factors that pretty much guarantee this company revenue growth in the long run. They also make it a top dividend stock to buy now and hold long-term.

BAT’s books look pretty good too and add to its viability as a dividend-paying stock. The company has a healthy profit margin of 24.12%, and an operating margin of 43.64%.

BAT also has strong cash flows of GBP 8.56 billion and leveraged free cash flows of GBP 4.95 billion.

This means it has the capacity to sustain its operations in the foreseeable future comfortably. Considering that dividend stocks are long-term investments, BAT stands out as a good stock to buy now for income growth.

2. Phoenix Group Holdings

An insurance giant

Another good stock to buy for dividend income is Phoenix Group Holdings (PHNX). Insurance is big business, and Phoenix is one of the oldest players in the UK insurance industry.

Phoenix is also a consistent dividend payer and has a dividend yield of 7.01%. Over the last 5-years, its dividend yield has been going up consistently, making it one of the best UK shares to hold for income.

However, it is not just the high dividends that make this stock a top stock to hold, its fundamentals are solid too.

The company’s quarterly revenue growth rate is pretty impressive and stands at 238.80%. This means there is demand for its products, and that demand is rising exponentially.

The balance sheet is pretty impressive, too, especially on cash flows. With over GBP 4 billion cash flows, Phoenix is well-positioned to operate optimally in short to medium term.

The company has also made several positive announcements in recent months that speak positively to its future.

Back in July, Phoenix announced that it was selling its business in Dublin for $272.73 million. The company said the move was meant to streamline its business in Europe. It added that the cash generated from this sale would be invested in high-return businesses.

Once these investments materialize, the company’s revenues are likely to grow going into the future. By extension, it means that dividends could go up in the future.

These factors, coupled with the fact insurance is one of the most stable businesses out there, there is no doubt that Phoenix is a top stock to buy and hold for income.

3. Persimmon

A real estate player

The UK has been booming for the better part of 2021. Persimmon (PSN) is a player in this industry and is one of the top dividend payers in the FTSE 100.

The company builds homes in the UK and many other places globally, and today has a dividend yield of 7.78%. Over the last few years, dividends have been going up consistently too.

Based on its fundamentals, this company has what it takes to keep paying dividends consistently going into the foreseeable future.

This week, it has released its half-year financial results, and they are impressive. Persimmon reported that in the first half of the year, profits grew by 64%.

These impressive results are consistent with data by the UK government showing that home prices in the UK grew by 13.25% in the first half of 2021.

Due to this strong demand, Persimmon sold 7,406 homes at an average of £236,199. Despite the high prices, its sales volumes increased by 50% compared to 2020.

Persimmon also has positive prospects for the future. According to its CEO Dean Finch, the company expects low interest rates and improving consumer confidence in the economy to drive up housing demand in the foreseeable future.

Besides the growing revenues, Persimmon’s books point to a stable company with good prospects to generate passive income going into the future.

The company has a current ratio of 4.85, which means it has more than enough resources to cover its current liabilities. 

Persimmon is also liquid enough to carry out its operations in the foreseeable future. It has an operating cash flow of GBP 765.5 million, and due to its high current ratio, it has the room to borrow without strain.

A combination of growing revenues and a strong balance sheet make this company a top UK stock to buy for income.

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