The internet is full of weird and wonderful ideas to make passive income. I recently read about a man with a particularly impressive beard who rents it out for advertising purposes.
Yes, some companies actually look for individuals with distinctive facial hair to promote their products!
Unfortunately, my beard isn’t that impressive. So I stick to the well-trodden path of investing in dividend stocks for passive income.
Today, my portfolio has around a dozen core dividend shares. Because no individual payout is ever guaranteed, this diversification helps me sleep well at night.
However, pretending that I had to choose just one income stock can be a useful thought experiment. It helps sharpen conviction and is also quite fun.
So, what company do I see paying me reliable dividends while allowing me to get a good night’s sleep?
Reassuringly boring
The firm I’d want would be a stable one operating in an industry that is highly unlikely to be radically disrupted by new technology (artificial intelligence, say). A tad boring, even.
In his 2001 letter to Berkshire Hathaway shareholders, Warren Buffett wrote: “I will tell you now that we have embraced the 21st century by entering such cutting-edge industries as brick, carpet, insulation and paint. Try to control your excitement.“
Of course, the point here is that bricks, carpet, insulation, and paint are the sort of boring things that will likely be around for a while.
Which brings me to Legal & General (LSE: LGEN). Founded in 1836, this diversified financial services company specialises in investment management, lifetime mortgages, pensions, and annuities.
Again, these are services that are permanent, and the need for them should only grow as the UK population ages. Legal & General has a proven business model and is extremely well-run.
High-yield dividend
Remember, I’m after a single stock to pay me passive income here. So I want a juicy dividend yield above the FTSE 100 average, which is currently around 3.9%.
Legal & General stock carries a yield of 8.1%. If analysts’ forecasts prove correct and the firm pays a dividend of 21.4p per share for this financial year, this puts the forward yield at 8.6%. Nice.
Meanwhile, the insurer’s track record of consistent dividend increases over many years is fantastic.
Financial year
Dividend per share
2025 (forecast)
22.6p
2024 (forecast)
21.4p
2023
20.3p
2022
19.4p
2021
18.5p
2020
17.6p
2010
4.7p
2000
3.7p
The future
Of course, a past record is just that — it’s in the past. And one slight worry I’d highlight here is a stagnant share price. Indeed, it is worse than that, because the stock is actually down about 8% over the past five years.
This helps explain why the yield is so high. The share price hasn’t kept up with the rising dividends, and this weakness has pushed the yield up.
The company’s new CEO is set to lay out his vision, probably at the annual shareholders meeting on 17 May.
Could a strategic overhaul include a lowering of the dividend? It’s possible, though so are share buybacks, which could boost the share price.
Whatever happens, I’d still expect to receive passive income above the market average over the long run.
So, if I really did have to put 100% of my cash in just one dividend stock, I’d embrace the uncertainty and pile into this one.
The post 1 UK dividend stock I’d put 100% of my money into for passive income appeared first on The Motley Fool UK.
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Ben McPoland has positions in Legal & General Group Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
