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Investing in UK stocks can be a great way to generate long-term passive income. He FTSE 100 it’s just packed with mature companies that generate cash and pay big dividends. There are lots of high-income stocks to buy in other London Stock Exchange indices, too.
The good news is that investors don’t need to spend a fortune to create life-changing wealth either. Let me show you how.
Creating wealth with just £7
Most people don’t have large sums of money available to invest in UK stocks. Money is even tighter now that inflation is hovering near 40-year highs.
But that’s okay. For the cost of a couple of starbucks coffee each day could put me on the path to financial comfort.
Let’s say I can regularly set aside £7 each day to invest. Over the course of a month, that adds up to £212.91. After a year, I would have £2,555 in my piggy bank.
Now suppose I use this to buy income stocks with dividend yields of 5%. If the brokers’ dividend forecasts prove correct, you would earn a passive income of £127.75 in a year.
Great long-term returns
This is clearly not a sum that will transform my standard of living. But the most successful investors are those who take a long-term approach, as billionaire stock guru Warren Buffett would attest.
If I keep investing that £7 a day, I could turn that passive income of £127.75 in the first year into over £1,277 by year 10. If I keep at it, I could eventually earn a second annual income above £3,832 a year. 30. After those three decades, he would have built a formidable stock portfolio too!
2 FTSE 100 stocks on my watch list
Of course, I might get an even better return if I can find dividend stocks with returns above 5%. Here are two high performance FTSE 100 stocks I’m considering buying for my own portfolio in 2023.
Vodafone Group
telecommunication business vodafone it has a long history of paying dividends that outperform the market. And for this year, the company has a huge dividend yield of 8.7%.
Vodafone is capable of paying large dividends thanks to its exceptional cash generation. You can also afford to pay above average payouts thanks to your defensive trades.
Demand for mobile telephony and broadband remains stable at all points in the economic cycle. This means that the company has enough profit to dish out healthy rewards to shareholders.
It would buy Vodafone shares despite the threat to earnings from stiff competition.
phoenix group
Mate FTSE 100 share phoenix group meanwhile, it has an excellent dividend yield of 8.4%. This is another company whose daily operations generate a lot of cash. You buy insurance policies from other financial service providers and run them to the end.
I like Phoenix Group for the immense brand strength of its Standard Life division. On top of this, I think demand for retirement insurance and products could skyrocket as the UK’s elderly population grows rapidly.
A lack of decent acquisitions could hurt earnings growth. But overall, I think Phoenix is a great dividend stock for long-term passive income.
