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of FTSE100 There are some great stocks for investors looking for passive income. And interest rates are at their highest levels in years, further accelerating this trend.
Lloyds Banking Group is a good example. The dividend yield is just under 6%, so I think it’s the best time to invest.
Dividend schedule
Over the past five years, Lloyds has paid out about a third of its profits to shareholders as dividends. But like many FTSE 100 companies, we don’t do this regularly.
The company pays dividends in May and September. That’s fine, but the best way to aim for £1,000 a month is to think of it as £12,000 a year.
This year, the company paid a total of 2.52 pence per share in dividends to shareholders. So to receive £12,000 you would need to own 476,190 shares.
At current prices, that would be £205,857. I don’t have that on hand, but buying stocks over time might be the way to get there.
Reinvestment and compound interest
With £1,000 today, you can start with 2,310 shares. And if you repeat the same thing next month and every month after that, you can increase your bet even more.
If you do this for many years, you will receive dividends that you can use to buy more stocks. For example, my starting investment of £1,000 will earn him a profit of £58.22 next year.
If the Lloyds share price stays where it is, you could buy another 134 shares, giving you even more passive income next year. Repeating this process will increase your profits even more over time.
How long will it take to reach 476,190 shares? It’s hard to say exactly, but I think if you invest £1,000 a month and reinvest your dividends, you can get there within 12 years.
risk and uncertainty
In Lloyd’s case, the company’s earnings are likely to fluctuate from year to year. And we expect the stock price to move in the same way.
Importantly, this means there is a very high risk that the company will not be able to maintain its 2.52p dividend for the year. However, I think the situation will change over time.
We don’t know what a company’s earnings or dividends will be in a particular year. But I’m confident that the 10-year average will be good.
In other words, the road to Lloyd’s stock is likely not to be smooth. But investors who buy for the long term will experience ups and downs, and I expect those who stick to that policy will do well.
passive income
It is impossible to be 100% sure that holding £1,000 of Lloyds shares a month for 12 years will build an investment that will generate an income of £12,000 a year. But the chances seem good to me.
However, it doesn’t have to be Lloyd’s. unilever lower volatility with lower current yields; Halma Growth prospects are good, but it will take time to materialize.
There are multiple ways to invest in the FTSE 100 and collect £1,000 a month. But I think it’s best to buy stocks gradually and reinvest the dividends.
