5 passive income ideas for £ 100 per month
There isn’t a lot in life that offers real passive income. The stock market is arguably an exception. At the very least, I think it has the potential to deliver the best return for the effort involved.
Plus, it doesn’t require you to have a lot of money to get started. In fact, I think an investor could build a solid dividend paying equity portfolio for just £ 100 per month.
Passive Income Winners
Assuming the cash is on hand, the key is to buy stocks that should, barring a “black swan” event, continue to pay dividends regardless of the weather. Utilities are a prime example, so my first choice is the electricity supplier national grid. In charge of much of the UK’s energy-related infrastructure, it currently brings in 5.1%.
Large Tritax Box stocks seem expensive. Nonetheless, demand for the type of warehouse space this Real Estate Investment Trust (REIT) owns is expected to continue for many years to come. After all, the popularity of online shopping is only expected to increase. So I would start building a position with the intention of adding more in times of general market unrest. The yield is 2.8%
E-commerce company IG Group remains one of my favorite listed companies. While the threat of increased regulation is never far away, the company’s exceptional levels of free cash flow should ensure that there is no risk that the dividend will be cut anytime soon. It is also a potential hedge if the markets become volatile. The IG is currently reporting 5.7%.
Boasting vivid lists of recognizable brands that shoppers tend to buy out of habit, Britvic and Unilever stocks – and their respective returns of 2.7% and 3.7% – also get my votes. Both have near-perfect records of growing dividends over the years.
This is what i could get
Based on their dividend forecast at the time of writing (and assuming I invest equal amounts in each), the five stocks above generate an average return of 4%. In other words, I would receive £ 4 in dividends for every £ 100 invested. That’s a lot more than what I would get from even the best Cash ISA in the neighborhood.
Are there ways to generate more passive income from UK stocks? Absoutely. However, one has to wonder how secure are the payments of cyclical companies involved, for example, in banking, housing construction and mining.
Of course, there is no guarantee that even the businesses I have selected will still be able to return money to their owners. However, I made sure to diversify the sectors. So even if one encounters a setback, the income level should still be decent.
Regardless of which stocks are selected, one thing worth highlighting is the time it takes to generate a significant stream of passive income. Initially, the money received will be negligible because the amount invested is small. This may not be suitable for those with itchy trigger fingers and limited patience.
There are ways to speed things up. Obviously, storing over £ 100 each month is an option. Saving on fees by using a stockbroker’s regular investment program will also help.
If the income is not needed right now, an even better solution is to reinvest the dividends. This stimulates capital accumulation through funding and could give me an even better passive income stream to tap into when I really want to get up.
5 actions to try to create wealth after 50 years
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Paul Summers owns shares in the IG group. The Motley Fool UK recommended Britvic, Tritax Big Box REIT and Unilever. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.