How to target a million from UK dividend shares

How can you make millions from the UK stock market? Ask the country’s 2,000 ISA millionaires, and we will find people buying many high-yielding dividend stocks and holding them for the long term.

Some successful investors have made fortunes from get-rich-quick multi-baggers. And they do not waste money on costs by chopping and replacing with short-term trading.

Over the past 10 years, Stocks and Shares ISAs have returned an average of 9.6% per annum. The good part is from dividends, which the most successful shareholders reinvest.

A good dividend year?

It looks like 2023 could be a very good year to put money into dividend stocks.

Before the pandemic, 2018 was the best year yet for FTSE 100 dividends, with a total of £85.2bn paid out. according to AJ Bell‘s Dividend Dashboard, 2023 can be set to beat. Estimates show a new record of £85.8bn.

Let’s think how close you can get to millions by buying some of the top in the UK FTSE 100 dividend stock.

Example 8%.

Taylor Wimpey It has one of the biggest forecast dividend yields right now, at 8%. Investing £100 a month at 8% per annum can return £18,000 in 10 years. In 20 years, it could rise to £52,000. It is from £100 per month. Anyone with £1,000 a month to invest could reach £1m in 26 years.

A property downturn could put pressure on dividends in the short term. But it also reduces share prices, helping us lock in better long-term results.

Various options

Some stocks group around the 7-8% dividend rate. They belong to investment companies M&G at 8.5% forecast, and British American Tobacco, with a prediction of 7.4%. Mining and commodity giants Glencore has a potential of 7%.

This says something important to me. That means we can combine a selection of high-yielding dividend stocks with good diversification.

For me, diversification is an essential component of successful long-term investing. The second is just for the long-term approach itself, I would say.

Is the FTSE 100 cheap?

The high number of dividends also makes me think that FTSE 100 shares across the board are good buys at their current prices. It’s not just one or two sectors, like banks, that generate dividends making them look undervalued. It is the stock market itself.

The FTSE 100 as a whole looks set to return around 4% in dividends by 2023, based on current estimates. Forecasts are subject to change, of course. But the return is pretty good in my book.

It includes all stocks now paying nothing, like Rolls-Royce and Ocadoalong with a lot of low-pencil.

Selected target

If we choose from among the higher yields, I think we can target 5-6% in dividends while maintaining good diversification. Some traditional shares are considered safe as well as offering good deals today, like Tescoit is 4.6%. In fact Unilever was at 3.6%.

This potential return does not include a cent in the share price gains. And I also expect good appreciation, in the long run.

There are no guarantees. But I really think millions from dividend stocks can be a realistic ambition for long-term UK investors.