3 passive income ideas I’m using today

Twenty pound notes in back pocket of jeans

One of my favourite passive income streams is the dividends from shares. By buying small slices of large, profitable companies, I can hopefully receive some financial benefit from their success.

Here are three shares I own for their passive income potential. Indeed, I would consider buying more of them for my portfolio.

M&G

Asset manager M&G (LSE: MNG) has some assets of its own I think can help its business in future, including its strong brand name and large customer base. They could help it make big profits and pay out healthy dividends.

Indeed, M&G plans to maintain or increase its dividend in future. Given that the current dividend yield is 8.3%, that could make it an attractive income share for my portfolio.

But dividends are never guaranteed. There are economic storm clouds on the horizon and one risk I see is that choppy stock markets could hurt M&G’s investment returns. That may lead to it losing some customers.

From a long-term perspective, I think the company’s reputation could help it attract and retain customers. I like the passive income potential of its dividend and would happily buy more for my portfolio.

British American Tobacco

Tobacco company British American Tobacco (LSE: BATS) has been around for decades – and increasing its dividend annually for the past couple of decades, at least.

The big question for this 6.1%-yielding FTSE 100 share is whether it will still be around and paying big dividends decades from now. Its most recent dividend increase was just 1% and the debt load of £39.7bn looks large to me. Servicing that could eat up profits, while declining cigarette use in most markets could hurt sales.

Set against that, British American has been battling falling cigarette use for decades and still remains highly profitable. Its portfolio of strong brands such as Lucky Strike could help it as it builds its business in non-cigarette product lines. That business is growing fast and the company expects it to turn profitable in 2025.

I still see risks from cigarette sales declining, but British American’s beefy dividend continues to make it an attractive passive income idea for me.

Abrdn

I would also consider adding more shares in investment manager Abrdn (LSE: ABDN) to my portfolio. Like M&G, it benefits from a large customer base and long reputation. I think its name is silly but I reckon a lot of customers will be happy to give it business if it manages their investments well, whatever it is called.

Having cut its dividend in the past few years, I think the payout now looks more sustainable than before. With a 7.4% yield at the current share price, I therefore find it an attractive option for boosting my passive income streams.

A recession could lead to customers investing less, hurting revenues and profits. But it could also lead to some investors shopping around to make sure their money is working hard for them – something that could be to Abrdn’s advantage.

Passive income from dividend shares

I own these three income shares already and I am happy to receive their passive income streams. I also continue to see each one as attractive so I would be happy to buy more for my portfolio.

The post 3 passive income ideas I’m using today appeared first on The Motley Fool UK.

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More reading

  • Top British stocks to buy in June
  • 7 UK shares to buy now to target dividend growth
  • 3 top FTSE 100 shares to buy in a recession
  • With inflation at 9%, here are 3 big dividend stocks I’d buy now
  • 6% dividend yields! 2 top income shares to buy in a recession

Christopher Ruane owns shares in Abrdn, British American Tobacco, and M&G. The Motley Fool UK has recommended British American Tobacco. 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.