Buying these 6 dividend powerhouses could make me £5k+ in passive income

Building a portfolio that can generate serious passive income is no easy feat. Attempting to predict future dividend payments from a company for years to come carries a certain level of risk. However, to some extent this is unavoidable. If I can start with the dividend stocks that are hot right now (and use my approach as a template for the future), I can hope to achieve my goals.

It starts with stocks

I have identified six stocks that are on my watch list to buy in the coming months to incorporate this strategy. All stocks are one in FTSE 100 or FTSE 250. This is Target Healthcare REIT (8.79%), Imperial brand (7.03%), Glencore (6.38%), The Ashmore Group (6.43%), Close Brother (6.59%) and BT Group (5.39%). Current dividend yields are in brackets.

I do not have the ability to go through the considerations in each stock in detail. But there are interesting characteristics in all my choices. For example, all have above average results. I don’t see the point in taking a stock with a 3.5% yield when I can just buy a FTSE 100 income tracker.

I have also made sure that I do not own stocks from the same sector. My ideas include exposure to property, finance, mining, consumer discretionary and utilities. In this way, I have tried to diversify my money by holding many stocks and also stocks from different regions.

Increase your income potential over time

If I took £1,000 and invested it in six companies, I would have an average dividend yield of 6.76%. So over the course of the next year, I need to generate an income of less than £68.

This is a long way from the target of £5,000 per year! But I’m not done with just parking £1,000 in dividend stocks. I will be able to increase the money in all stocks in two ways. I will take £68 from next year and put it back into my portfolio, buying more of the same shares. I will also earn money from regular sources of income. I can take the monthly amount from this and reinvest it in the same stock.

If I consider that I can reinvest with the same dividend yield over time and I can invest £450 per month, the figure quickly adds up. In fact, after a decade I will have a pot worth more than £78,000. In the following year, I could get £5,300 in dividend payments. This will achieve my goal.

Not reinventing the wheel

My strategy is not complicated. It depends on me being disciplined and also on stock picks performing well. The latter is a risk. But I have the flexibility to invest my new money into a variety of hot stocks in the coming years. Therefore, I can manage it carefully. I think my goals are realistic, and there’s no time like the present!