I’d put £83 a week into this Dividend Aristocrat for £1,000 a year in passive income

Dividend Aristocrat is a company that has paid and increased payouts to shareholders over a long period of time. The UK market has a few dozen of these stocks, and they can be good stocks to consider when starting to build an income-paying portfolio.

If I was aiming for £1,000 a year in passive income, I would buy Dividend Aristocrat Legal & General (LSE: LGEN).

A powerhouse of financial services

When it comes to dividend stocks, Legal & General ticks all the boxes for me. Founded nearly 200 years ago, it specializes in pensions, asset management, and insurance. The group now has more than £1trn of assets under management. And it has a long history of generating impressive cash flow and has a strong balance sheet.

I want to see a company that has consistently increased earnings over many years (preferably decades) to support its dividend. And I’d rather see a long track record of raising its payouts. Again, ticks are all here for L&G.

Other than that, the stock looks great. Its low price-to-earnings (P/E) ratio is 7.5.

A grand year in passive income

The stock yields a 7.5% dividend, which is about twice the average FTSE 100. Today, one share is 253p, and the total dividend for the current fiscal year is 19.4p per share. That means I need around 5,155 shares to generate a passive income of £1,000 a year. That will cost me around £13,000.

Obviously, this is a large amount of money. I may not be able to earn that kind of money right away. But that doesn’t mean I can’t gradually work towards that number through regular weekly investments.

For example, if I buy 33 Legal & General shares a week, that will cost me a little over £83 (depending on the situation). Which is clearly more affordable. And if I do that every week for a year, I’ll have 1,716 shares.

After three years, I had 5,155 shares, which could pay me £1,000 in annual passive income.

Of course, stock prices won’t be static for three years. It will naturally fluctuate. But the drip-feeding of money every week should be smooth up and down.

In addition, the forward yield is currently around 8%. While very juicy, the higher the yield, the greater the risk that the dividend will be cut. Even Dividend Aristocrat can reduce their payouts!

Some considerations

Of course, I wouldn’t put all my money in one stock. I plan to diversify my portfolio over time, with different income stocks, in case one stops paying dividends.

And I’m lucky that my brokerage account offers commission-free trading. Some platforms still charge for each transaction, which will increase the investment cost every week.

Overall, Legal & General’s excellent track record and pedigree lends credence to this being a good choice for passive income. That’s why I’m a happy shareholder, and regularly add stocks to my good income-paying portfolio.

Over the long term, I expect this stock to continue to reward shareholders with a good level of passive income.