I’d buy 10,000 Tesco shares for £100 in monthly passive income

How about planning some passive income to help fund your retirement? I can’t think of anything better than dividend paying UK stocks.

Today, I have eyes Tesco (LSE: TSCO), and a forecast yield of 4.5%. It’s not one of the biggest in the UK, but it seems to be growing every year.

If I buy Tesco shares in my Stocks and Shares ISA, how much should I get out of £100 a month? That’s £1,200 per year. So based on that 4.5% yield, I need a pot of almost £27,000. Today the stock price is 10,000.

That plan

But before I figure out how to get there, there are a few things. First, Tesco’s share price has been up and down like most in the past few years. Over five years, it’s down 10%, so it’s risky.

Now Tesco’s dividend is high. But it has dipped several times in the month, and there will be a risk of cutting in the winter.

However, over the long term, I think Tesco could be one of the best income stocks. It’s in the key sector, and it’s big cheese.

Yes, there will be pain now. With high inflation, high costs, and less cash for people to buy, all retail companies will feel the pinch.

What if?

Now, I’m going to use the current stock price and yield for my numbers. This is just a ‘what if?’, to see what can be done. It is not a prediction.

So what is my first step? Well, I need to figure out how I can buy the shares I need. I don’t have money for them together. But I can set some aside each month in my ISA.

And when I had enough, I bought some shares and continued. Oh, and I invest my dividend money every year in other stocks.

How long?

With £100 a month, how long will it last? With a 4.5% return, I can get out in 16 years. It may seem like a long time, but it is accessible to many people out there.

And if I can earn £200 a month, I can reduce it to less than 10 years.

So with £200 a month in Tesco shares, I could build up a pot worth close to £27,000 in just a decade. Then I will set aside £100 a month to live on.

Real life

Of course, I wouldn’t put all my money in Tesco. No, I would diversify as the main way to help reduce risk.

So I will save money every month. Then when it’s time to buy, maybe go to Tesco for the first time. And next, buy Barclays. That way, I can create multiple stocks, all paying cash every year.

I don’t hold any Tesco shares at the moment. But they are on my list of passive income stocks to buy when I can.