I’d spend £5k right now on cheap dividend-paying UK shares for 2021

first_img Investing £5k, or any other amount, in cheap dividend-paying UK shares may be an attractive option for 2021 and the long term. After all, FTSE 100 and FTSE 250 shares offer higher passive incomes than other income-producing assets such as cash and bonds.Furthermore, dividend-paying stocks could become increasingly popular over the medium term. Their potential to deliver dividend growth, as well as a lack of opportunities available elsewhere, could turn an investment today into a surprisingly large amount over the long run.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…The passive income appeal of cheap dividend-paying UK sharesThe stock market crash means that many dividend-paying UK shares currently trade at cheap prices. Certainly, the stock market rally has lifted the levels of the FTSE 100 and FTSE 250 in recent weeks.However, many stocks still trade at considerably lower levels than they did at the start of the year. As such, their dividend yields are high in many cases. Evidence of this can be seen in the FTSE 100’s dividend yield, which currently stands at around 5%.On a relative basis, UK shares currently offer an attractive passive income. Obtaining even 20% of the FTSE 100’s yield via cash or high-quality bonds is tough. Meanwhile, other assets such as buy-to-let bring problems such as a lack of diversification and high initial deposit requirements.Therefore, from an income investing outlook as 2021 comes more sharply into view, dividend-paying UK shares appear to be the best option for a £5k investment, or any other amount.Capital growth potential in a stock market rallyAs well as their passive income prospects in 2021, dividend-paying UK shares could deliver capital growth in a likely stock market recovery. Their high yields suggest that, in many cases, they currently offer good value for money.This may mean they have significant scope to deliver impressive capital returns as the economic outlook improves and investor sentiment does likewise.Furthermore, their potential to produce dividend growth may improve during the course of 2021. Stronger operating conditions prompted by fiscal and monetary policy stimulus packages may filter through to many FTSE 100 and FTSE 250 companies.Alongside an improving economic outlook, this may cause dividend-paying UK shares to raise their shareholder payouts. The end result could be increasing dividends, as well as rising popularity among investors that pushes their share prices higher.Managing risksOf course, dividend-paying UK shares are riskier than other income-producing assets. Therefore, it’s imperative that an investor checks the financial soundness of companies before investing in them. Furthermore, building a diverse portfolio of companies can help to further reduce overall risks.Over time, a portfolio of dividend stocks could offer a potent mix of passive income and capital growth. As such, now could be an opportune moment to buy a range of them. Peter Stephens | Saturday, 5th December, 2020 Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! See all posts by Peter Stephens Image source: Getty Images. Our 6 ‘Best Buys Now’ Shares Enter Your Email Address I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Simply click below to discover how you can take advantage of this. “This Stock Could Be Like Buying Amazon in 1997” I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. I’d spend £5k right now on cheap dividend-paying UK shares for 2021last_img read more