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One of my favourite ways to try and build passive income streams is by buying shares in blue-chip UK shares that pay dividends.
Dividends are never guaranteed to last, so I pick the shares carefully and keep my portfolio diversified across different companies. Here are three in my portfolio currently that earn me easy money – I just sit back and let the passive income roll in!
Card Factory
The retailer Card Factory (LSE: CARD) has not distinguished itself on the stock market lately. Over the past year, this UK share has drifted down by 5%.
But it has a simple, proven business model that it is increasingly seeking to take international. Last week’s final results were broadly impressive: revenue grew 6% and the dividend per share was raised by 7%.
The City’s reaction was lukewarm, though. There were some parts of the results I did not like: net debt (excluding leases) rose 71% while basic earnings per share fell 4%. Tariff disputes disrupting supply chains is a risk for the business.
But with a price-to-earnings ratio of 8, I see Card Factory as an attractively valued, easy to understand business that I think could keep growing. Its dividend yield is a juicy 4.9%.
Diageo
Many companies cut their dividends from time to time, or hold them flat.
Compare that to Guinness brewer Diageo (LSE: DGE). It has grown its dividend annually for decades. The current dividend yield is 3.6%, just above the FTSE 100 average of 3.5%.
Past performance is no guarantee of what may come next, not only for dividends but for the business too. While the black stuff continues a run of strong growth that now stretches back a few years, other parts of Diageo’s business have been faring less well.
Demand in Latin America has weakened, some pricy spirits brands have lost their allure in key markets and tariffs pose one more risk for a company already struggling to cope with what a weak economy may mean for consumption habits.
But with its unique brands and manufacturing sites, a large base of loyal customers, and extensive global distribution network, I remain upbeat about the long-term outlook for Diageo.
Henderson Far East Income
A high yield can be a red flag but it is not always so.
Henderson Far East Income (LSE HFEL) is an investment trust that also has a recent record of growing its dividend per share each year, which is a key objective for the trust.
A 31% drop in its share price over the past five years means that this UK share now yields 11.8%.
That is unusually high and there is a risk that economic volatility in Asia could hurt company earnings, making it harder for the trust to keep paying out dividends at the current level.
It owns stakes in firms like China Construction Bank and Taiwan Semiconductor Manufacturing Co. If it keeps investing effectively, a combination of capital gains and earned dividends could hopefully help the trust keep growing its annual payout even from its already exceptional level.
