2 UK shares I’m considering for March to build up passive income

Income stocks like precious metals have been in the midst of an equity crisis over the past year, as UK stocks have felt the heat of high inflation and rising interest rates in the form of stagnant share prices.

But even as FTSE 100 index like resurgence this year, I always pay to hedge the portfolio with passive income, that is through income shares paying dividends. I am looking for a pair that can benefit from the profit margin and rebound in share value this year.

British American Tobacco

British American Tobacco Shares (LSE:BATS) have been subdued this year, with investors largely unresponsive to the stock’s recent earnings.

Earlier this month, the company published annual earnings that saw profits rise by 6% to £2.31 a year. Moving forward, the group continues to aim to pay out 65% of earnings per share as dividends.

Target price upgrade has flooded in for tobacco companies from the like Barclays, JPMorgan and Deutsche Bankgiving the share price as much as 28%.

A downside to the British American appeal is obviously the steady decline in demand for cigarettes, and the unprofitable arm of the non-smoking group.

But it’s an existential threat rather than an imminent one, and it’s hard to ignore the dividends.

I will consider adding the company to the portfolio for the next financial year when it ropes in more dividend-hunters.

Legal & General

Legal & General (LSE: LGEN) has had something of a problem in the FTSE 100 in recent years. The company’s value has been largely unchanged since 2015 when it displayed volatility that would have been anathema to my portfolio.

But as a result, from a price-to-earnings perspective, L&G now looks dirt cheap. The company’s multiple of 7.6 is almost half of the average of the FTSE 100. Moreover, according to analysts, the stock will soon pop.

Barclays recently lowered its price target for the insurer from 397p to 390p. But that still represents over 50% upside for the stock. Jefferies, JPMorgan and Berenberg have all projected a strong rise for the stock over the next year.

There is the issue of regulatory changes, which has surprised investors that IFRS17 – the global accounting standard that the sector will implement on January 1, 2023 – could affect cash flow and reduce profits by 20-25%.

But last month, Barclays addressed this issue by saying that the changes posed a smaller risk to asset values ​​than reported, as it called L&G “one of the most attractive stocks in the European Insurance sector”.

I might be convinced to invest in L&G with that agreement. And regardless of share price performance, it’s clear that L&G has been a reliable asset for dividend investors, and this year’s forecast of 8.1% is no different.