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How I’m targeting lifelong passive income with these top UK shares

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Building durable passive income is an excellent approach for investors who don’t want the constant stress of watching share price movements. Targeting shares with high dividend yields provides me more personal time and financial freedom as regular payouts flow through in the background.

But identifying rewarding dividend stocks is tricky. Payouts can depend on the company’s quarterly and annual performance. Therefore, I favour companies that have a consistent dividend history alongside stable financial performances. Let’s look at two UK shares that stand out as key candidates for my passive income portfolio. 

M&G

Global investment manager M&G (LSE: MNG) currently trades just under 197p. Half-year results crashed the share price in August and it fell 12% to 196p. Yet the stock remained robust over the last 12 months with just a 1% fall. With an impressive dividend history, I think this UK share can help deliver the second income I’m after. 

M&G offers a 9.11% dividend yield. Its interim payout follows previous figures, with 6.2p per share to arrive on 29 September. A buyback should elevate shareholder value as £150m of a total £500m is deployed. By the end of September, M&G will have returned an impressive £1.5bn to investors since FY19. 

Yet the company needs to financially sustain this. Assets under management fell from £370bn at the beginning of FY22 to £349m in its half-year report. Management blamed this on adverse market movements. Consequently, post-tax profits plummeted 75% from a loss of £248m to £1.04bn. 

This suggests the dividend aristocrat may struggle to deliver future payouts. But I’m not concerned. M&G increased capital generation from £309m to £439m. Management also announced acquisition of Continuum Financial Services. This indicates the company can remain afloat through short-term profit falls and begin increasing revenues through its new customer base.

I think M&G can recover from its wavering financials and continue to deliver on its average final payout of 17.4p (since FY19). Indeed, I’ll be adding M&G shares to my passive income portfolio. 

Imperial Brands

Imperial Brands (LSE: IMB) is another UK share I’d consider. Strong revenue increases resulted in its share price leaping 10% in mid-May, while the tobacco company has seen a 26% rise over the last year. It now trades at 1933.

Yet the half-year report wasn’t all positive. Operating profits fell 27% to £1.2bn. A departure from Russian markets (estimated at £201m) and divestment from the Premium Cigar Divisions (£281m) clearly took a hit.  

However, the company has expanded its Pulze product range in European markets and Blu marketing proposition in the US. Net revenues from next-gen products increased 39.5%, totalling £77m. This indicates Imperial has successfully adapted to the changing market as consumers increasingly switch from cigarettes to electronic vapes. 

The company also boasts an impressive dividend history. With an average final payout of 167p since FY17. Its dividend yield currently stands at 8.4%. With the successful launch of NGPs in Europe and the US, I think payouts will continue to arrive at similar figures.

Despite a fall in operating profit, the company is increasingly adapting to its market and demonstrating high prospects in overseas markets. This gives me faith that Imperial can continue to deliver strong payouts for the foreseeable future. Imperial will certainly be a staple of my passive income portfolio. 

The post How I’m targeting lifelong passive income with these top UK shares appeared first on The Motley Fool UK.

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Hamish Cassidy has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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.