I’d aim to make £1k a year from UK dividend stocks

first_img Enter Your Email Address Christopher Ruane | Friday, 11th June, 2021 Simply click below to discover how you can take advantage of this. £1,000 each year in passive income would come in quite handy for me. I have a plan to achieve that by investing in UK dividend stocks. Here’s how.What are dividend stocks?When companies generate profits, they can use it in a few ways. Sometimes, they will pay off existing debt. Saga is an example of a company which doesn’t plan to pay a dividend for several years, as it has significant debt on its balance sheet. Often companies will use surplus cash to invest in growth. Fast expanding firms like S4 Capital and THG don’t pay dividends because they believe they can use the money to grow their businesses.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…But often, companies will pay out at least some of the money as dividends. These are payments a company makes to shareholders, based on the size of their shareholding. A business that generates a lot of cash but lacks attractive growth opportunities is a classic example of a dividend stock. Such UK dividend stocks include British American Tobacco and National Grid.UK dividend stocks as passive income streamsThese dividends could form a passive income stream. That’s how I hope to generate £1,000 a year by sitting back and waiting for the dividends to roll in. Of course, there’s always a risk that dividends won’t be paid.For example, a company could reduce its dividend as it reorganises its business, like Imperial Brands did last year. It could cut the dividend while business is tough, as Babcock has done. It could also simply decide to stop paying dividends altogether for a while.To mitigate this risk, I invest in a variety of UK dividend stocks. That diversification isn’t limited to individual shares – I also make sure I invest across a number of different business sectors.My £1,000 passive income planThe FTSE 100 yield averages around 3%. So to achieve £1,000 a year in dividend income at that rate, I would be looking at an investing pot of around £33,400. Could I achieve my passive income with less? I think I could.My plan would be to invest in shares that pay out a higher dividend yield than the average. Fortunately, there’s no shortage of such shares. For example, British American Tobacco pays out 7.5%, M&G also yields 7.5% and the payout on Legal & General equates to 6.4% at the current share price.If I can select a diversified group of shares with an average yield of 7%, for example, I’d hope to generate £1,000 annually in passive income with a pot of less than £15,000.Risks in UK dividend stocksBut why would shares yield more than double the average?One explanation is that the 3% average figure is skewed by growth stocks that don’t pay dividends. So quite a few dividend stocks offer a higher dividend yield than the average.But high dividends can also signal a market assessment of risk. The market may think that a company’s future prospects look dim. There’s a risk that smaller profits could lead to dividend cuts.Yet if I diversify my portfolio and only invest in what I think are attractive companies (rather than focusing just on yield), I hope to minimise that risk. With an initial capital investment, or a pot built up over time, I hope to generate £1,000 annually from my portfolio of UK dividend stocks. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Our 6 ‘Best Buys Now’ Shares christopherruane owns shares of Babcock International Group, British American Tobacco, Imperial Brands, and S4 Capital plc. The Motley Fool UK has recommended Imperial Brands. 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. Learn how you can grab this ‘Top Income Stock’ Report nowcenter_img Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. I’d aim to make £1k a year from UK dividend stocks Image source: Getty Images. We think that when a company’s CEO owns 12.1% of its stock, that’s usually a very good sign.But with this opportunity it could get even better.Still only 55 years old, he sees the chance for a new “Uber-style” technology.And this is not a tiny tech startup full of empty promises.This extraordinary company is already one of the largest in its industry.Last year, revenues hit a whopping £1.132 billion.The board recently announced a 10% dividend hike.And it has been a superb Motley Fool income pick for 9 years running!But even so, we believe there could still be huge upside ahead.Clearly, this company’s founder and CEO agrees. The Motley Fool UK’s Top Income Stock… See all posts by Christopher Ruanelast_img

Leave a Reply

Your email address will not be published. Required fields are marked *