The allure of passive income is as strong as ever in the current inflationary environment. Right now, quite a few companies have dividend yields I find attractive. I have a list of UK shares to buy for my portfolio that have appealing income potential. Here are two I have bought that both yield over 8% at the moment.
It is not an easy time to be in the fund management industry. As Jupiter said in its interim results yesterday, “the first half of 2022 has been particularly challenging”. That is true for the industry as a whole, with consumer anxiety and economic problems causing assets under management to fall at firms including Jupiter.
Rival Abrdn (LSE: ABDN) may struggle with such challenges in a similar way to Jupiter. We will find out next month when the company unveils its interim results. Meanwhile, the company has a dividend yield of 8.9%. I find that very attractive and as a shareholder in Abrdn already, certainly appreciate the dividend income I get from the firm.
I think the company’s reputation and brand can help it attract and retain clients. Financial services can be a lucrative sector as the sums involved are large, so even a small commission can make for healthy profits. The profit margins can also be very high. Last year, for example, Abrdn made a profit of £995m on revenue of £1.7bn. That is a 59% margin, which I think is excellent.
Navigating choppy economic waters could mean lower profits in coming years. But with a strong business foundation and customer base, I think Abrdn earns its place on the list of UK shares to buy now for my portfolio.
Another UK share with a yield close to 9% is tobacco producer Imperial Brands (LSE: IMB).
When it comes to growth, I see limited reasons for optimism here. Cigarettes are in long-term decline in many markets. Meanwhile, Imperial’s ambitions in non-cigarette products are more modest than those of rivals like British American Tobacco.
But cigarette sales have been declining for decades already yet remain highly cash generative. That could continue for a long time yet. Meanwhile, Imperial has been investing in marketing for key countries. It hopes that by building its market share it can achieve a slower rate of sales decline than the overall market.
All of that adds up to juicy dividends and currently the yield is 8.9%. A big cut in 2020 put the dividend on a more even footing. Imperial can sometimes feel like a company in its sunset years but that sunset may keep going for many decades. If I get a dividend yield of almost 9% for holding the shares, I do not mind Imperial’s lack of exciting growth prospects!
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Christopher Ruane owns shares in Abrdn, British American Tobacco, Imperial Brands, and Jupiter Fund Management. The Motley Fool UK has recommended British American Tobacco, Imperial Brands, and Jupiter Fund Management. 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.