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The UK stock market has a large number of quality high-yield dividend stocks to give me reliable and growing passive income. However, not all that glitters is gold. Some high-yielding stocks don’t appeal to me because I don’t think the payouts are sustainable.
However, I think the renewable energy sector offers some attractive opportunities for passive income. Here’s one FTSE 250 action that stands out to me.
energy transition
The Renewables Infrastructure Group (LSE: TRIG) is a £3.2bn renewable energy investment company that invests in assets that generate electricity from renewable sources. TRIG (for short) owns a broad portfolio of wind and solar farms in the UK and five other countries in Europe.
The company estimates that 1.1 million properties feed into its portfolio. It sells the electricity these assets generate and then distributes a large proportion of that money as income to shareholders.
What I like most about this investment is that it is in an attractive sector. The growth of the world’s capacity to generate electricity from renewable technologies is set to accelerate in the coming decades.
That gives TRIG a firm foundation from which to pay me a reliable stream of passive income. Also, I like the number of countries it operates in, which eliminates the risk of prolonged adverse weather in a single country (no wind, for example).
£500 a year in passive income
The stock has an above-market dividend yield of 5.2%. A share is 131p, as I write. That means you would need roughly 7,500 shares to generate £500 a year in passive income. That would cost me around £9,825.
It is quite a considerable sum. Clearly, not all investors can dish out that kind of cash. But that doesn’t mean you can’t buy a few stocks each week and build toward that number over time.
For example, if I buy 48 shares a week, that would cost me £62 (as it stands). That is obviously much more affordable. If you did that consistently every week for a year, you would have about 2,500 shares. They would pay me £170 a year.
After three years, I would have 7,500 shares, which would pay me over £500 in annual passive income. However, it could be more as next year’s pay is expected to rise to 7p a share (from 6.8p today).
Of course, the stock price will not remain static for three years. It will rise and fall with the natural ups and downs of the market.
Warnings
Of course, this is for illustrative purposes only. I wouldn’t put all my money in one stock. And I’m lucky that my brokerage account offers commission-free trading. Some platforms still charge for each transaction, which would add significantly to the costs.
It should also be noted that TRIG occasionally raises capital through equity placements to finance growth. This can cause short-term volatility in the stock price.
And, more generally, it is not guaranteed that dividend payments will always be met. They could be reduced or eliminated entirely to preserve capital. However, TRIG’s strong track record, going back almost a decade, gives me confidence that it is an excellent candidate for generating passive income.
As such, I intend to add it to my own portfolio as soon as the capital is available.
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