HomeInvestingI’d buy 81 shares a month of this FTSE 100 stock for...

I’d buy 81 shares a month of this FTSE 100 stock for £1,000 a year in passive income

Picture supply: Getty Photos

A number of shares within the FTSE 100 index are nice for producing passive earnings from shareholder dividends.

It’s arduous to decide on between a few of these high-yielding shares. Nevertheless, one Footsie firm simply delivered an ideal set of full-year outcomes, and it’s on the prime of my checklist of candidates now.

This enterprise is flying!

It’s Aviva (LSE: AV), the UK-based insurance coverage, wealth, and retirement enterprise.

The outcomes report hit the newswires on 7 March and covers the agency’s efficiency throughout 2023. Working revenue rose 9%, and the enterprise noticed “continued progress momentum”.

To reward shareholders, the administrators introduced a share buyback programme price £300m, raised the dividend for the yr by 8%, and upgraded steerage for future dividends. Wanting forward, chief govt Amanda Blanc expressed confidence within the outlook for 2024.

Aviva is financially sturdy., Blanc mentioned. The corporate is buying and selling persistently properly, and the agency’s prospects have “by no means been higher”.

Metropolis analysts seem to agree. They’ve pencilled in an uplift in earnings over 20% for 2024 and count on an additional single-digit-percentage enhance within the dividend.

All that excellent news makes me optimistic that Aviva can proceed to be an honest supply of passive earnings for me within the years forward.

A perky share value

The inventory responded properly to the report and has been on the rise. There’s some danger for brand spanking new shareholders if it retains going up and the valuation will increase. Such a bullish transfer can go too far after which reverse later.

Nonetheless, as I write on 7 March, the share value stands close to 462p, and the valuation appears undemanding to me given the strong information flowing from the corporate.

On the present stage, the forward-looking dividend yield for 2024 continues to be properly above 7%. I see that as a very good place to begin for a passive earnings stream. However on prime of that, if the corporate retains rising its earnings, there’s potential for the dividend to extend additional within the coming years.

A thousand kilos a yr in passive earnings

With the shares close to 462p, I’d want round 2,909 to generate £1,000 a yr in passive earnings. That will value me about £13,440.

So it’s a fair-sized dedication and never one thing I can afford day by day! However I should purchase the inventory month-to-month and work in direction of the total quantity over time.

For instance, shopping for 81 Aviva shares a month would value me simply over £374 with the share value the place it’s as we speak. Over three years, I might find yourself with the two,909 shares desired.

In fact, the share value most likely received’t keep the place it’s over that period of time. However drip-feeding my cash each month might be a good suggestion with shares. The method is named pound-cost averaging and may also help iron out ups and downs.

Nonetheless, Aviva’s ongoing enterprise efficiency and dividend funds aren’t assured. If the agency’s operations run right into a downturn, it’s doable to lose cash on the inventory. That applies even when pound-cost averaging.

On steadiness, with spare money to take a position, I’d embrace the dangers and intention for long-term beneficial properties by including the inventory to my diversified portfolio.


Most Popular