Since I first started buying shares in 1986, my investing approach has changed radically. In the early years, I had no clear strategy, so I was probably more of a trader than an investor. Today, I prefer to buy into solid, quality businesses — usually FTSE 100 or FTSE 250 firms — and then sit back to watch my dividends roll in.
I love my FTSE 100 dividends
American business magnate John D Rockefeller once remarked, “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in”.
As an older investor, I fully understand what this titan of industry means, because this rising stream of passive income helps to build future financial security for my family.
However, I also know all too well that future dividends are not guaranteed. Therefore, they can be cut or cancelled at any time. This happened repeatedly during the Covid-19 crisis of 2020/21. Also, as my wife and I don’t need this income yet, we just reinvest it into buying yet more shares.
Indeed, after I retire, I expect my FTSE 100 and other dividends to be my main source of income — perhaps even greater than my pensions. And when my wife and I die, our shares, funds, and other financial assets will pass to our children, so that they too can enjoy this passive income.
For example, here is one FTSE share that we bought last summer for its longstanding ability to return regular cash payouts to its shareholders.
L&G: my dividend dynamo
In early July of last year, my wife added shares in asset manager and life assurer Legal & General Group (LSE: LGEN) to our family portfolio. We paid an all-in price of 246.7p a share — what I thought was a bargain at the time.
Unfortunately, since the US regional-banking crisis in March, L&G shares have weakened. As I write, they trade at 219.5p, roughly a fifth below their highs of early March. This values the 187-year-old group at £13.1bn, making it a FTSE 100 stalwart.
Alas, this fall leaves us nursing a paper loss of 11% to date. But this loss excludes dividends, which are very generous from this well-known firm. In fact, last year’s cash payout totalled 19.37p — and L&G increased its interim dividend by 5% last week.
At the current share price, these FTSE 100 shares offer a bumper dividend yield of 9% a year, covered twice by earnings. That’s a solid margin of safety. Even so, the shares are down 13.8% over one year and 13.7% over five years.
Of course, L&G’s future is closely tied to that of global financial markets. Hence, if we have another crash like those of 2022 and spring 2020, then the group’s results could take a hit. But major market meltdowns aside, I can’t see any good reason to ever sell this delightful ‘Duke of Dividends’!
