I’d start buying FTSE 100 shares now to boost my 2023 income

With almost a year to go, now could be a good time to focus on your personal finances. One of my goals this year is to increase my income. The obvious way to do this is by working more hours. But another is generating passive income from stocks.

Here’s how I’ve managed to get around it, sticking with blue-chip FTSE 100 stocks.

Why the FTSE 100?

With a world of stocks open to me, why would I focus on the leading UK stock FTSE 100 index? After all, the alternatives include investing in the US market, or buying into smaller UK companies.

In fact, I’ve done both, so I see the role they can play in my investment strategy. But I also own some FTSE 100 shares and plan to buy more this year.

These companies tend to be established blue-chip companies. I know that because the index is basically arranged by size. Broadly speaking, it contains the 100 London-listed companies with the largest market capitalization on a given date.

Size is not necessarily an indicator of quality. But broadly speaking, I think if a company has been around for decades and continues to operate at scale, it’s probably doing something right. I would say that the description contains many FTSE 100 shares, for example shell, Unilever and Lloyds Bank.

However, while index membership is a size indicator, that alone does not make the company a good fit for my portfolio, especially if my focus is income.

Find income stocks to buy

For that, I will limit the search in the index. I will look for businesses that I know, because it will be easier for me to assess the prospects.

My idea of ​​passive income is to generate dividends. To do this, the company must spend excess cash that is not needed in the business. So I will look for companies that I think have a unique competitive advantage in a sector with resilient demand. That can generate excess income, which can be paid out as dividends.

Unilever is an example. The collection of premium brands offers price power. The company pays dividends every month.

The role of producing

Dividends are never guaranteed, so I wouldn’t put all my investment funds in one company such as Unilever. However, I will be spread across different companies.

How much I can earn depends on the average dividend yield of the stocks I buy. That’s basically the amount of dividends I should get in the year, expressed as a percentage of what I paid for the shares. Unilever’s yield is 3.5%. That’s fine, in my opinion, but other FTSE 100 stocks offer higher yields.

I will try to increase my income – but smart. So, I don’t just want to get the highest share. However, I will consider the overall quality of the company and the value offered by the stock price. Prospective dividend yield will only be one consideration.