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Average dividend from FTSE 100 It is 3.7%. That gives me £370 passive income per year from a £10,000 investment. That would be helpful, but I’m sure I can do better.
By investing in individual high dividend stocks, I think I can target £760 annual dividend income from £10,000. That equates to a 7.6% yield – double the FTSE 100 average.
Here, I explain how this works – and which UK stocks to buy to implement my passive income strategy.
Is 7.6% true?
I will start with responsibility. Dividends are never guaranteed and share prices may decline. For this reason, investing in income stocks should not be seen as a substitute for saving money.
Having said that, in my experience, the UK market is an excellent place to hunt for sustainable high dividends.
In my opinion, the 10 companies I have listed below have a good chance of maintaining and possibly increasing their dividends in the coming year.
| Company | Profit forecast |
| Direct Line Insurance Group | 10.3% |
| Four developments | 9.9% |
| Liontrust Asset Management | 8.6% |
| Phoenix team | 8.4% |
| Imperial Brands | 7.4% |
| Vodafone | 7.2% |
| Vesuvius | 6.4% |
| Dunelm Group | 6.3% |
| Landsec | 6.1% |
| DS Smith | 6.0% |
| Average | 7.6% |
These stocks offer an average forecast yield of 7.6% at current prices. This equates to an active income of £760 per year with £10,000 invested.
Why are they so cheap?
All these companies are FTSE 100 or FTSE 250 Members. They are profitable and pay that profit. must be. To be sustainable in my view
However, I can see some risks. Insurance direct line and fund manager Liontrust are currently facing difficult market conditions. Housebuilder Bharat reported a slowdown in new sales.
If conditions continue to deteriorate, the earnings of these companies may decline next year. This may reduce their dividend potential. If performance is worse than expected, a dividend cut may be required.
Looking down the list, I think Vodafone and tobacco group Imperial’s brands are over-yielding because investors doubt their ability to deliver long-term growth. However, I think both companies are in good financial health. I don’t expect either of them to cut their room.
Industrial group Vesuvius could be hit by the global economic downturn, while home goods retailer Dunelm also faces the threat of a slowdown in UK consumer spending.
Passive Income: Getting Started
There are always risks when buying stocks. These must be balanced against the potential rewards of a successful investment.
I own some of the stocks on this list and would love to buy the rest. However, I probably wouldn’t rely on a portfolio of 10 stocks. That got me a little distracted.
Instead, I use these 10 stocks as a starting point and aim to expand my portfolio to 15-20 stocks over time. This additional diversification gives me access to additional growth opportunities while mitigating the impact of future dividend cuts.