I’d buy 2,115 shares of this stock for £1,000 a year in passive income

At FTSE 100 multinational mining company Glencore (LSE: GLEN) earned $256bn in revenue last year. That generated $19bn in revenue, of which $7.1bn must be paid back to shareholders as dividends. This company is very successful in mining and trading natural resources for the world to use, and I can share in the success and earn passive income if I buy some shares.

I think £1,000 a year back in the company is doable. Here’s how I’m going.

Own part of the company

In my view, the best way to earn passive income is from investing in stocks. I am not likely to start my own company, but I can have a small piece of one by taking up some shares that will then give me income.

With Glencore, I will receive dividend payments twice a year. And with a company as big and reliable as the mining giant, I can predict what the future earnings will be from the stocks I hold.

Holding a position in any stock involves risk. Stocks can lose value, dividend payments are not guaranteed, and even the best businesses can suffer from the unpredictability of the stock market.

A golden opportunity

I think now is a golden opportunity to reach my £1,000 per year target sooner than ever.

With many investors spooked because of the SVB bank crisis, I see this as a great chance to pick up shares on the cheap. The FTSE 100 is down around 8% in the past month, for example.

In the case of Glencore, the company is down 19% in 2023, and I can buy one share in this great company for just 439p.

Less than five shares sounds cheap to me – it puts the company at a price-to-earnings value below four – and pushed the dividend yield for the year up to 10.77%.

How to aim for £1,000 a year

A back-of-the-envelope calculation showed that the sum of £9,285 would give him 2,115 shares in Glencore and an income of £1,000 a year. It’s a neat amount right away, and it can grow over time if I reinvest it back into this or other stocks.

A big caveat is that the 10.77% return is incredibly high. If returns fall in the future, I will need more investment to reach £1,000 per year. For example, a 7% return would require £14,285 in shares.

The truth is never that simple. Dividends change frequently, and the fortunes of natural resource companies can ebb and flow depending on what copper or zinc prices do.

A good general strategy I like to follow is to look for good deals and try to save and invest what I can. I’m always adding to my portfolio, and it’s great to see my investment and income grow over time.

And the next time I have spare cash available to invest, I will look to open a position in Glencore to give myself a strong second source of income.