Here’s how I’d invest £20k in the FTSE 100 today to target £1,250 in dividends

Investing in blue-chip stocks to build a regular dividend stream can help increase your income. I have a few FTSE 100 stock for exactly that. Although they may not be exciting companies, some of them regularly spend extra money and pay out to their shareholders. I would love to get some!

If I had £20,000 in a Stocks and Shares ISA today and wanted to target an annual dividend income of £1,250 by investing in FTSE 100 stocks, this is how I would do it.

Set a strategy

I will start by being clear about my goals and then setting up an investment strategy that I think can help.

With income as my goal, I would be willing to turn down the prospect of exciting growth. The FTSE 100 contains many generative companies that are slowly but surely growing in mature industries.

Diversification is an important part of risk management for investors. With £20,000 a sufficient amount to allow me to spread my portfolio in various stocks, I will divide it on average by five to 10.

Some sectors such as tobacco and financial services are now generating enough juice. But I have to make sure that I am not only different companies but also between different sectors. Filling my portfolio with too many high-yielding financial services stocks could be a big mistake if a worsening environment causes them to cut their dividends, as we saw last month with insurance companies. Direct Line.

Choose a stock

The next step is to select stocks that I feel can benefit from the company’s competitive advantage combined with high customer demand.

Some I already have from the FTSE 100 included British American Tobacco (yield 7%), Vodafone (8.5%), M&G (8.9%) and Abrdn (6.9%). The four stocks only gave an average yield of 6.3%.

For a target of £1,250 in annual dividends, an average yield of 6.3% would be quite high. But I don’t want to invest in just four stocks. As I said above, I would try to diversify at least five stocks and maybe 10.

Fortunately, now some other FTSE 100 stocks are looking interesting to me. They have good business prospects and what I see is a good stock price. In addition, some have results that meet my goals, or even higher.

For example, insurance Legal & General yields 7.1% and Phoenix offers 7.7%. Buying some stocks with yields above 6.3%, I can still achieve my overall goal of buying some others with lower yields. I will do that, in part so that my portfolio is heavily concentrated in financial services.

Reap the rewards of the FTSE 100

By investing £20,000 in a carefully selected and diversified portfolio of FTSE 100 blue-chip companies, I hope to set up a long-lasting stream of dividends.

Over time, some payouts may fall while others will hopefully increase. But for now at least, I’m sure I’ll be making £1,250 a year while staying only in big, well-known companies.