Forget NS&I Premium Bonds and Income Bonds. I’d buy FTSE 100 shares for a 5% dividend income

first_img See all posts by Peter Stephens Forget NS&I Premium Bonds and Income Bonds. I’d buy FTSE 100 shares for a 5% dividend income The stock market crash means the FTSE 100 currently trades over 20% down on its 2020 starting price. While many companies have cut or postponed their dividends in response to tough operating conditions, the index continues to offer a dividend yield of around 5%.As such, it may provide a more attractive passive income than other options, such as NS&I Premium Bonds and Income Bonds. Low interest rates mean they may fail to deliver an above-inflation return in 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 FTSE 100’s passive income opportunityAs mentioned, the FTSE 100 currently has a dividend yield of around 5%. Certainly, there’s no guarantee this will be the passive income return generated over the next year. An uncertain economic outlook means that companies could decide to lower their shareholder payouts.However, at the same time, an improving economic outlook may mean that dividends increase at a relatively fast pace.Even with an uncertain outlook, the FTSE 100 index appears to offer a more attractive passive income opportunity than NS&I Premium Bonds and Income Bonds. Their prospects have been negatively impacted by low interest rates that could remain in place for a prolonged period of time.The challenging economic outlook may persuade policymakers to retain a loose monetary policy for a number of months, or even years. Holders of NS&I Premium Bonds or Income Bonds may therefore find that their returns fail to offer a worthwhile passive income.Building a portfolio of UK dividend sharesOf course, it’s possible to build a portfolio of FTSE 100 shares that offers a higher dividend yield than 5%. A number of UK shares currently trade at significantly lower prices than at the start of the year.Therefore, their dividend yields may be relatively high – especially if they have been able to maintain their shareholder payouts. Buying a diverse range of them may offer a significantly better passive income return than that of the wider index.Clearly, a number of FTSE 100 companies may yet cut their dividend payouts. As such, it’s important to diversify across a wide range of sectors and geographies when building a passive income portfolio.This could certainly create a more stable income stream that is more resilient and robust during what is a tough period for the world economy. It may also lead to higher growth in dividends in the coming years, as an investor has exposure to a wider range of growth opportunities.A long-term viewFTSE 100 shares are clearly riskier than NS&I Premium Bonds and Income Bonds. However, the difference in income returns between them at the present time may mean that UK shares offer appeal over a long-term time horizon.They may also deliver impressive capital appreciation as the world economy recovers and investor sentiment does likewise. 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. Simply click below to discover how you can take advantage of this. “This Stock Could Be Like Buying Amazon in 1997” Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!center_img 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. 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. Enter Your Email Address Peter Stephens | Thursday, 5th November, 2020 Our 6 ‘Best Buys Now’ Shareslast_img