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One of my favorite passive income ideas is owning dividend stocks. It’s because I can benefit from the hard work and success of some massive companies without having to lift a finger myself.
Here are some dividend stocks I would buy today if I had the money and wanted to build a passive income portfolio.
Family name
I will invest in three blue-chip stocks that are major companies in their field but operate in different sectors.
Sainsbury’s has a large supermarket chain but also benefits from a growing digital footprint. A large user base and a distinctive set of retail propositions give the company a competitive advantage that can help drive profitability. The dividend yield on Sainsbury’s shares is 5.1%. However, cost inflation remains a risk to short- and medium-term profits.
I would also invest in financial services giants Legal & General, with a yield of 7.1%. Like Sainsbury’s, it has an established and familiar brand. Claims inflation is a risk for insurance companies. competition Direct Line recently axed its dividend. But I would be happy to put Legal & General into my portfolio for the long term.
My third pick will add to the holding there Lucky Strike cigarette manufacturer British American Tobacco. While rejecting sales as a threat to profits and profits, the company has actually expanded the former through a combination of acquisitions, price increases and expanding its non-tobacco business. Like Legal & Common, it offers a 7.1% juice yield.
Diversification
One of the challenges of investing is how best to diversify. Diversification helps me reduce my risk, by ensuring my portfolio is not affected by any one thing.
In this example, I used a portfolio of five dividend stocks. That has given me some diversification. Both are forms of investment trusts to provide additional diversification, as the trusts each invest in dozens of stocks.
Investment trust
The first is European Assets Trust. The next dividend payment on PT.ASA shares has paid 6.2%.
The dividend deduction refers to a policy based on the trust’s net asset value per share at the end of the previous year. So the dividend could go up again in the future, even if it could go down.
The trust invests in a number of small and medium-sized companies in continental Europe. That could help benefit as Europe’s economy returns to growth mode.
I will also invest in it Revenue & Growth venture capital trust. The yield here is an impressive 10.7%, currently. Because dividends are funded from the trust’s investments in growing companies, they can be moved significantly.
There is a risk of confidence in investing in promising companies that go nowhere, destroying profits. Plus, some of their picks are doing the right thing – with Revenue & Growth benefiting from getting in at an early stage.
Monthly targets
The average yield of the above 5 stocks is 7.2%. So to reach my target of £120 in passive income per month, I need to invest £28,800. I can do it using lump sum. But I can also get closer to my goal over time, by investing money regularly.
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