Yields of up to 8.7%! 3 UK dividend shares I’d buy for passive income

Forget low-yielding savings accounts and volatile cryptocurrencies. You can also keep increasingly expensive buy-to-let. I think investing in UK shares is the best way to make a healthy long-term passive income.

British stocks have made an average annual return of 10% during the past 10 years. I’m confident that with the right approach I could make a better return than this, though. I’m hoping to make an average return each year of between 12% and 15%.

And I think concentrating on dividend stocks could be the best way to make a positive return in 2023. Enjoying solid capital appreciation could be difficult as inflationary pressures batter the global economy and corporate earnings come under pressure.

Here are three UK dividend shares I’m considering buying for next year. I think they could deliver exceptional passive income long into the future.

Foresight Solar Income Limited

Electricity producers like Foresight Solar Fund could be great safe haven stocks to buy in 2023. I like this particular one, too, because of its wide geographic footprint.

You see the FTSE 250 company’s renewable energy assets are located in the UK, Australia, and Spain. Power generation (and therefore profits) at these stocks can tumble during cloudy periods. But Foresight’s presence across multiple territories — and especially Down Under — helps to reduce this risk.

Indeed, Australia has the highest solar radiation per square metre of any continent on Earth, according to the government there.

Foresight Solar Fund trades on a price-to-earnings (P/E) ratio of just 4.3 times right now. It also carries a 6% dividend yield.

Ediston Property Investment Company

Retail park specialist Ediston Property Investment Company offers an even-better 8.7% forward dividend yield. And its corresponding price-to-earnings growth (PEG) ratio sits at just 0.4.

Any reading below 1 indicates that a UK share is undervalued.

Retailers in shopping parks face an uncertain future as the economy splutters. But Ediston has its tenants tied down on long-term rental contracts. This provides it with exceptional earnings visibility regardless of retail industry conditions.

I’d buy the real estate investment trust (REIT) even as rising interest rates push up its borrowing costs. The retail park sector is tipped for strong growth in the years ahead as consumer habits evolve.

United Utilities Group

Investors in water suppliers like United Utilities can also expect big dividends despite the bleak macroeconomic outlook. This particular UK utilities share carries a 4.5% forward dividend yield.

Like electricity, water is one of those commodities we cannot do without. That gives operators like this FTSE 100 one excellent earnings stability, and by extension the means (and the confidence) to keep paying market-beating dividends.

Indeed, City analysts expect annual payouts here to keep climbing through to financial 2025 at least.

I’d buy United Utilities shares despite Ofwat calls that firms reduce pollution and improve customer service. The regulator’s demands could push sector costs higher.