Here’s how putting £3k into FTSE 100 shares could earn me £15+ in monthly passive income

Christopher Ruane outlines how he could invest a few thousand pounds to benefit from the profits made by blue-chip FTSE 100 companies.

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If I wanted to boost my passive income streams, one way is to invest in shares that pay me dividends. Over time, hopefully those payments would build into a growing income stream. If I had a spare £3,000 to invest right now, here is how I could put it into a handful of FTSE 100 shares to target over £15 of passive income per month, on average.

Going for quality

There is a wide universe of shares I could buy, so why focus on the FTSE 100?

The index features a group of 100 of the largest companies listed on the London stock market. While size alone is not an indicator of quality, in broad terms, I think a business that is able to survive for decades and achieve a large market capitalisation often has demonstrated commercial strength.

No matter how good a business might be though, it can always run into unforeseen difficulties. That is why I would diversify my investment, by putting £600 into each of five FTSE 100 shares.

Choosing the shares

I would focus on buying shares in firms I expect could do well in coming years, thanks to strong customer demand and a competitive advantage. So what five companies would I buy into under this plan?

First is Vodafone. I recently invested in the telecoms giant, which currently offers an 8.4% dividend yield. I think its large installed base is a key asset, though a chunky debt pile puts future dividends at risk.

Next would be another of my current holdings, British American Tobacco. It has built a successful global business around brands including Lucky Strike. But declining cigarette sales could hurt revenues and profits, though the firm is growing its non-cigarette income streams aggressively. The shares yield 7%.

I would also buy into retailer Tesco, with its 4.7% yield. I see the supermarket giant as a fairly unexciting but, hopefully, solid choice. I think its large store network and economies of scale could help it benefit from resilient demand in the grocery market. Pricing competition could eat into profits though.

I would invest in insurer Legal & General. A harsh winter could push up claims settlement costs, hurting profits. But the company has long experience in a market with strong demand, in which its well-known brand helps it attract clients. The shares yield 7.1%.

The fifth and final choice for my portfolio of FTSE 100 dividend payers would be packaging company D S Smith. I expect continued strong demand for packaging due to buoyant digital commerce. This can help the company keep doing well, though higher pulp costs pose a risk to profits. The D S Smith dividend yield is 4.7%.

Buying my FTSE 100 portfolio

This is an illustration of how I could put £3,000 into well-known shares today. The average dividend yield would be 6.4%, which should give me a dividend income equivalent to just under £16 a month.

For now, without spare cash available to use on this plan, it will remain on the drawing board. But I am attracted to the idea of buying blue-chip FTSE 100 shares to help boost my passive income streams.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has positions in British American Tobacco P.l.c. and Vodafone Group Public. The Motley Fool UK has recommended British American Tobacco P.l.c., DS Smith, Tesco Plc, and Vodafone Group Public. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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