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Get-rich-quick schemes are high-risk and sometimes scams. But if an investor’s sensible, there’s no reason why a generous passive income stream can’t be generated in a relatively short space of time. By using dividend shares and allocating money away from lower-yielding areas, I believe £1k a month can be worked towards.
Big numbers needed
Let’s start by working backwards. The average dividend yield in the FTSE 100 right now is 3.47%. Yet with active stock-picking, I feel I could build a diversified portfolio with a yield of 6.5%. As a result, to end this year with the pot set to make £250 in monthly income, the investor would need to have a total size of £46,153.
Therefore, if the investor had that amount in savings they could put the money to work immediately. It would get them up to speed even before the end of 2025.
It’s likely to be the case that getting to £250 a month from zero savings by the end of the year would mean too much financial pressure. In that case, there’s no problem with investing a comfortable amount and simply aiming to reach the goal over a longer period. In fact, it then becomes about which stocks are included in the portfolio to be sustainable in paying out funds over several years.
A pivot in property
One idea for consideration I believe’s sustainable for the future is Land Securities (LSE:LAND). The firm’s one of the UK’s largest real estate investment trusts (REITs). To keep the tag and benefits of being a REIT, it has to pay a certain amount of profit to investors as a dividend. This is already a green flag when it comes to finding a sustainable income payer.
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Over the past year, the share price is down 12%. Part of this dip has come due to concern that the portfolio is predominantly made up of office assets. Given the continued work-from-home stance of some companies, demand in this area still isn’t great. Even though this remains a risk going forward, I’m not too concerned. It’s preparing to sell £2bn worth of office blocks to pivot into residential property, which could be a great move.
The stock’s current income yield is 6.7%. It’s paid out a consistent dividend for over two decades, and I doubt this will change anytime soon. The latest dividend cover figure of 1.2 is reassuring. It means the current dividend is well covered by the earnings per share.
I think it’s a good stock to consider for any investor trying to beef up dividend income as part of a broader portfolio.
