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Buying stocks and collecting regular dividends from them will help me build an additional source of income without taking on a new job. One way I can do that is by investing in shares from the FTSE indices, eg FTSE 100 Or FTSE 250. These include most of the large companies listed above London Stock ExchangeAs assessed by market capitalization.
Here’s how I plan to feed £180 per month into FTSE shares with a target of generating £1,000 per year in dividends.
Why I buy FTSE shares.
I have various stocks in my portfolio. But very few are in the FTSE 100, e.g JD Sports And Standard Chartered. I also own some of the FTSE 250 members A safe place And Jupiter.
So, what attracts me to such FTSE shares? The answer is that I don’t buy shares just because they are in the FTSE index. Instead, I look at their long-term business potential and if I like what I see, consider their price attractive to me.
An index like the FTSE 100 tends to hold large, long-established blue-chips Diageo And HSBC. How do companies like this get to this size? In many cases, it has been decades of building a business that is uniquely suited to the needs or wants of many customers.
This is no guarantee that they will continue to be effective in the future. But right now, with the recession looming and the business environment looking challenging for many companies, I feel confident in their business models for investing in good times and challenging companies.
Distributed income opportunities
Given how mature some of these FTSE businesses are, it makes sense that many have limited investment in funding for growth. So you can use the extra cash to pay more dividends instead.
For example, I own two tobacconists from the FSTE 100. British American Tobacco It has a dividend yield of 6.2% while competing. Imperial Brands 8.4% more.
But I don’t simply go for high yield FTSE shares. For example, the FTSE 100 miner Rio Tinto It yields more than 11%. However, I am concerned about the risk of profiting from the next metal price decline, so I chose not to hold the shares this time.
Instead, I’ll focus on what I’ve said before: finding great businesses at great stock prices. Only then will he consider the profit margin.
Aim for 1,000 pounds per year
Currently, the average yield of the FTSE 100 is 3.7%. So if I have a portfolio of over £27,000 earning that average yield, I should be able to generate £1,000 a year in dividends.
It would take me 12-and-a-half years to reach £27,000 saving £180 a month. But I could use the power of compounding the dividends — reinvesting them into more stocks. By doing that I could have invested over £27,000 over 11 years. That will allow me to hit my £1,000 annual profit target.