Investing £ 12,048 in these 3 dividend stocks could earn me an annual income of £ 1,000


Making passive income from dividend paying stocks is a great way to help me make money. If I own multiple dividend paying stocks, I can expect to receive cash most months of the year. Sometimes I can have a specific amount that I want to accumulate during the year. This could be offset by a particular invoice or add up to allow me to buy something. If I want to make £ 1,000 a year, this is what I would do.

Points to remember

If I want to make £ 1,000 a year from dividend stocks, I want to pick the right ones. There are a few key points I need to consider. Mainly, I want to choose stocks that have good prospects. This is because I don’t just want the dividend payment for this year, but for several years to come.

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Another point that I must consider is the dividend yield offered. Ideally, I want to choose high yielding stocks. This way I don’t have to invest so much of my own money to earn the £ 1000. However, I don’t always want to pick the stock with the highest return as it can be unsustainable.

Of the four FTSE 100 stocks below, I can aim for an average dividend yield of 8.3%. That would mean I would have to invest £ 12,048 up front. This could then give me an annual income of £ 1000, assuming nothing materially changes. I have to remember, of course, that such payment is not guaranteed.

The dividend-paying stocks I would choose

The first stock I would look to buy is Phoenix Group. The current proposed dividend yield is 7.31%, with the price down 2.3% year on year. Phoenix Group operates in the insurance industry and has a history of strong cash generation. This has enabled dividend growth for most of the past decade for investors. I have no reason to doubt that this will not continue in the future, so I will add it to my portfolio. One risk I need to be aware of is that company-run retirement policies could be negatively affected by rising interest rates and falling stock markets.

The second company is M&G. The current proposed dividend yield is 9.23%, with the price increasing 30% over one year. After being kicked out of Prudential, the company is doing well. I think he has a stable business model, generating income from assets under management. One of the risks is that if we see another market crash, investors could withdraw funds, which could hurt M&G.

The final dividend stock is British American Tobacco. The current proposed dividend yield is 8.34%, with price increasing 3% over one year. Some might find it too risky to include a tobacco company in their portfolio due to declining demand. But the reality is that traditional nicotine or vape products will still have a significant market for years to come. The company has been around since 1902, so if we’re talking about sustainability, BATS ticks the box for me.

Overall, by investing in these three dividend paying stocks, I can aim to achieve my passive income goal.

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jonathansmith1 has no position in any of the stocks mentioned. The Motley Fool UK recommended British American Tobacco and Prudential. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.

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