Investors have plenty of ways to aim for a large second income. But I believe the best way to supplement my earnings with extra cash is by buying FTSE 100 shares.
Broadly speaking, Footsie-quoted shares tend to:
• Be mature, market-leading businesses, whose steady cash flows enable regular and reliable dividends.
• Have operations in multiple regions, which in turn spreads risk across markets and provides more consistent revenues and cash flows.
• Possess robust balance sheets, which can help them pay a decent and stable dividend even during economic downturns.
• Focus on offering large and growing dividends to attract investors.
A £4,440 passive income
As I say, this is the broad rule when it comes to investing in the FTSE 100. But dividend cuts can still happen that can unexpectedly whack investors’ passive income and cause share prices to slump.
This has been the case with both National Grid and Vodafone in 2024.
But today there are still many rock-solid income shares to choose from. Legal & General (LSE:LGEN) is one of my favourites from the index.
If City forecasts are accurate, the company would provide me with a £4,440 passive income between 2024 and 2026. That’s based on a £15,000 lump sum investment I made at the start of the year.
Dividend hero
In my opinion, Legal & General has one of the best dividend records on the Footsie.
Dividends have risen every year (excluding 2020) since the Great Financial Crisis. And dividend yields have smashed those of almost every other share on the index in that time.
This is thanks in part to the firm’s highly resilient business model. Its presence in multiple geographies and sub-sectors (like insurance, asset management, and pensions) provides healthy and reliable cash flows.
Such impressive dividend growth also reflects the company’s enduring capital strength. Today, its Solvency II capital ratio sits at 223% as of June, roughly unchanged from a year earlier.
This gives Legal & General room to invest for profits growth, while also continuing to reward shareholders with large and growing dividends.
10%+ dividend yield
Year
Predicted dividend per share
Dividend yield
2024
21.32p
9.6%
2025
21.83p
9.9%
2026
22.36p
10.1%
As the table shows, City analysts expect dividends to keep rising through the next few years at least. I’m confident too, that — despite the threat posed by intense competition in its markets — it will keep growing cash rewards over the long term.
This will be underpinned by rising demand for wealth and retirement products as the global population ages.
I actually invested £15,000 in Legal & General shares at the start of 2024. So I’m expecting those £4,440 worth of dividends to come my way over the next few years.
However, I’ve also bought several other FTSE 100 stocks with strong records of dividend growth and/or market-beating yields. These include Aviva, Ashtead Group, Coca-Cola HBC, and Rio Tinto.
I’m confident this diversified approach will help me make an index-beating passive income for years to come.
The post Here’s how I’ve targeted a HUGE passive income with FTSE 100 shares appeared first on The Motley Fool UK.
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Royston Wild has positions in Ashtead Group Plc, Aviva Plc, Coca-Cola Hbc Ag, Legal & General Group Plc, and Rio Tinto Group. The Motley Fool UK has recommended Ashtead Group Plc, National Grid Plc, and Vodafone Group Public. 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.
