I’d buy 50,000 Lloyds shares for £100 in monthly passive income

What’s the best way to fund our retirements? Mine is by investing for dividend income, and that includes buying Lloyds shares.

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I think the best way to save and invest for my retirement is with UK shares. And I buy them in a Stocks and Shares ISA. We have a new ISA year just starting too. So I’m looking at Lloyds Banking Group (LSE: LLOY) shares today.

The Lloyds share price has been up and down all over the chart. And it’s still down more than 25% over the past five years.

Question

There’s one key question. Are Lloyds shares a good way to build a long-term passive income stream? Well, the dividend has been up and down too, and it was cut when Covid was here.

But in the long run, I think Lloyds is very likely to bring in the cash to pay the dividends. I think they’ll grow too. But, for now, I’ll work with the forecast yield of 5%.

I must stress that this is just a “what if?” thing. I just want to show the kind of passive income that can be made from UK shares. So I’m not trying to predict what will happen with Lloyds shares.

How much?

The next thing to ask is how much money would I need to get my £100 per month income. That’s £1,200 per year. So with a 5% dividend, I’d need to build up £24,000. And at today’s share price, that’s about 50,000 shares.

Now I don’t have that many Lloyds shares. So how do I build up a pot that size?

What I need to do is save each month in my ISA. Then, when I have enough for an investment, buy some shares. And I just need to keep doing that for long enough.

How long?

I reckon it should take around 14 years to reach my goal. It will depend on how often I can buy, and on what the Lloyds share price is doing. Oh, and where the dividend goes over the years.

But on today’s figures, that’s about how long it should take.

So I invest £100 per month starting now, and then sit back and take £100 in passive income for life. That sounds good to me, if I can do it.

I could get there a lot quicker though. If I could invest £200 per month, I could build up my Lloyds shares pot in just eight years.

Or I could keep going at £200 per month for the 14 years. And then take £200 per month, every month, after that.

Risk

As I say, this is just a sample of what could be possible. And there’s no way I’d put all my old age money into just one stock.

And Lloyds faces the same risks as any bank shares when we’re in tough times, like right now.

I aim to build a diversified ISA, with a spread of good dividend stocks picked from across the sectors. That should help me if we have any specific sector falls. And it should help even out my income too, as some dividends rise while some fall.

But yes, I’ll keep Lloyds shares as one of my long-term ISA shares.

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.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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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