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He FTSE 100 it is home to many quality dividend-paying companies. The index pays a higher collective average return than most others around the world. For me, there is no better place to look to increase my passive income.
Here’s a FTSE 100 titan you’d consider aiming for £1,000 a year in passive income.
mining ATM
glencore (LSE: GLEN) is one of the world’s largest natural resource companies. The company produces and markets a wide range of metals and minerals, including copper, cobalt, zinc and nickel. It also trades third-party aluminum and iron ore.
However, what is more controversial is that the company is also a large producer of coal. This part of his business has been booming recently, with fossil fuel prices skyrocketing 70% last year alone. In fact, the world is on track to use more coal than ever this year.
While this isn’t good for global warming (since coal releases more carbon dioxide than other fuel sources), it has been good news for Glencore’s earnings. In its half-year results announced in August, the company reported adjusted cash earnings of $18.9bn (£15.7bn). That was more than double the number from the previous year.
While this surge in earnings won’t last forever, it does mean the mining giant has plenty of cash to pay big dividends right now.
A great year in passive income
The dividend is expected to be 46 pence per share, as it stands. So with the share price at 553 pence today, that equates to a prospective dividend yield of around 8%. That is much higher than the FTSE 100 average of 3.7%.
That means you would need roughly 2,260 shares to generate £1,000 a year in passive income. Those would set me back around £12,500.
Now, that’s a lot of money. You may not be able to pay that all at once. But if you were to put £75 a week into the stock instead, you could gradually work your way up to that number.
If I did it this way, it would take me just over three years to reach my goal of £1000 in annual passive income.
Of course, the stock price will not remain static for three years. But drip feeding my money every week would smooth out the natural ups and downs.
not without risk
Glencore is largely at the mercy of commodity prices. No one really knows which way they will go this year or next. The dividend could be reduced, which would likely affect the share price.
That being said, the expected dividend is well covered by the anticipated earnings. Dividend coverage now sits at nearly three times, increasing the likelihood of payments being made.
Longer term, I am very bullish on the prospects for many mining stocks. Many of the commodities that Glencore produces (particularly copper and nickel) will play a crucial role in the global attempt to reach net zero by 2050.
In addition, the company has pledged to eventually divest its portfolio of coal assets. Last month, it announced that it would close 12 coal mines by 2035, with the aim of reducing their emissions by 50% by that year.
I have put the stocks on my watch list with a view to taking a position in the coming weeks.
