Image source: Getty Images
A Dividend Aristocrat is a company that has paid and increased its payment to shareholders over a long period. The UK market has a few dozen of these stocks, and they can be great stocks to consider when starting to build an income-paying portfolio.
If I were aiming for £1000 a year in passive income I would buy Dividend Aristocrat legal and general (LSE: LGEN).
A financial services powerhouse
When it comes to dividend stocks, Legal & General ticks all the boxes for me. Founded almost 200 years ago, it specializes in pensions, asset management and insurance. The group now has over £1tn of assets under management. And it has a long history of generating impressive cash flows and has a strong balance sheet.
I want to see a company that consistently increases its earnings for many years (preferably decades) to support dividends. And I’d rather see a long history of increasing your payments. Once again, it ticks here for L&G.
Also, the stocks appear to be of great value. It has a cheap price-to-earnings (P/E) ratio of 7.5.
A great year in passive income
The stock has a dividend yield of 7.5%, which is roughly double the stock average. FTSE 100. Today a share costs 253 pence and the expected total dividend for the current fiscal year is 19.4 pence per share. That means you would need about 5,155 shares to generate £1,000 a year in passive income. That would cost me around £13,000.
Obviously, that is a substantial sum of money. You may not be able to accumulate that kind of cash right away. But that doesn’t mean I can’t aim to gradually work my way to that number through regular weekly investments.
For example, if I buy 33 Legal & General shares a week, that would cost me just over £83 (as it stands). That is obviously much more affordable. And if you did that every week for a year, you would have 1,716 shares.
After three years, I would have 5,155 shares, which could pay me £1,000 in annual passive income.
Of course, the stock price will not remain static for three years. It will naturally fluctuate. But drip feeding my money every week should smooth out the ups and downs.
Additionally, the forward yield now sits at a whopping 8%. While it is very juicy, the higher the yield, the greater the risk that the dividend will be reduced. Even dividend aristocrats could lower their payouts!
Some considerations
Of course, I wouldn’t put all my money in one stock. I would aim to build a diversified portfolio over time, with different income stocks, in case one stopped paying dividends.
And I’m lucky that my brokerage account offers commission-free trading. Some platforms still charge for each transaction, which would add significantly to investment costs each week.
Overall, Legal & General’s excellent track record and pedigree give me confidence that this is a great choice for passive income. That is why I am a happy shareholder myself and regularly add more shares to my well-diversified portfolio of contributors.
In the long term, I expect this action to continue to reward shareholders with attractive levels of passive income.
var config = {
apiKey: ‘1ed121d592e04642d57912bb369ef696621661a3’,
product: ‘PRO_MULTISITE’,
logConsent: false,
notifyOnce: false,
initialState: ‘NOTIFY’,
position: ‘LEFT’,
theme: ‘DARK’,
layout: ‘SLIDEOUT’,
toggleType: ‘slider’,
iabCMP: false,
closeStyle: ‘button’,
consentCookieExpiry: 90,
subDomains : true,
rejectButton: false,
settingsStyle : ‘button’,
encodeCookie : false,
accessibility: {
accessKey: ‘C’,
highlightFocus: false },
onLoad: function () { // hide Cookie Control recommended settings button.
var recommendedSettingsButton = document.getElementById(‘ccc-recommended-settings’);
if (recommendedSettingsButton) {
recommendedSettingsButton.classList.add(‘hide’);
} },
text: {
title: ‘Privacy Notice’,
intro: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
necessaryTitle: ”,
necessaryDescription: ”,
thirdPartyTitle: ‘Warning: Some cookies require your attention’,
thirdPartyDescription: ‘Consent for the following cookies could not be automatically revoked. Please follow the link(s) below to opt out manually.’,
on: ‘On’,
off: ‘Off’,
accept: ‘Accept’,
settings: ‘Cookie Preferences’,
acceptRecommended: ‘Accept Recommended Settings’,
notifyTitle: ‘Privacy Notice’,
notifyDescription: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
closeLabel: ‘Save Preferences and Close’,
accessibilityAlert: ‘This site uses cookies to store information. Press accesskey C to learn more about your options.’,
rejectSettings: ‘Reject All’,
reject: ‘Reject’,
},
branding: {
fontColor: ‘#fff’,
fontFamily: ‘Arial,sans-serif’,
fontSizeTitle: ‘1.2em’,
fontSizeHeaders: ‘1em’,
fontSize: ‘1em’,
backgroundColor: ‘#313147’,
toggleText: ‘#fff’,
toggleColor: ‘#2f2f5f’,
toggleBackground: ‘#111125’,
alertText: ‘#fff’,
alertBackground: ‘#111125’,
acceptText: ‘#ffffff’,
acceptBackground: ‘#111125′,
buttonIcon: null,
buttonIconWidth: ’64px’,
buttonIconHeight: ’64px’,
removeIcon: false,
removeAbout: false },
necessaryCookies: ( ‘wordpress_*’,’wordpress_logged_in_*’,’CookieControl’,’PHPSESSID’,’fivc’,’fivs’,’fivp’,’Ookie’,’Fool_subinfo’,’_gads’,’_gid’,’_gat’,’_ga’,’__utma’ ),
optionalCookies: (
{
name: ‘Sharing’,
label: ‘I would like content tailored to my personal preferences.’,
description: ‘We work with advertising partners to show you ads of products and services you may be interested in. You can choose whether or not to have ads delivered in a personalised way by setting this option. You can return to review this setting at any time by clicking the "C" logo in the bottom left corner of any page.’,
cookies: ( ‘_ga’, ‘_gid’, ‘_gat’, ‘__utma’, ‘_gads’ ),
onAccept: function () {
// Add Facebook Pixel
!function(f,b,e,v,n,t,s)
{if(f.fbq)return;n=f.fbq=function(){n.callMethod?
n.callMethod.apply(n,arguments):n.queue.push(arguments)};
if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version=’2.0′;
n.queue=();t=b.createElement(e);t.async=!0;
t.src=v;s=b.getElementsByTagName(e)(0);
s.parentNode.insertBefore(t,s)}(window,document,’script’,
‘https://connect.facebook.net/en_US/fbevents.js’);
fbq(‘init’, ‘901682110316659’);
fbq(‘track’, ‘PageView’);
fbq(‘consent’, ‘grant’);
// End Facebook Pixel
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, true ) ;
},
onRevoke: function () {
fbq(‘consent’, ‘revoke’);
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, false ) ;
},
recommendedState: ‘on’,
lawfulBasis: ‘consent’,
},
),
statement: {
description: ”,
name: ”,
url: ‘https://www.fool.co.uk/help/privacy-and-cookie-statement/’,
updated: ”
},
};
CookieControl.load(config);
