Buying 8,770 shares of this FTSE 100 dividend stock could get me a second income of £3,844 a year

Will 2023 turn out to be the best year ever for investing in stocks to bag a second income? I think it might come very close.

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The UK stock market has gained ground in the past month. But I still see plenty of big dividend yields that look good for building a second income.

If the FTSE 100 is set for a new bull run, how long might these big yields last?

Sector down

Housebuilders offer some good yields. Taylor Wimpey is on a forecast 7.9% now, even though the share price is up from from its summer low.

There’s 7.3% on the cards at Persimmon too, though its share price hasn’t regained quite as much.

That’s a cyclical sector, damaged by a property downturn and high mortgage rates. But I see years of income from it in the future.

Two favourites

Two more of my long-term favourites are on high forecast yields now too. I’m talking about British American Tobacco, and National Grid. Neither is my top pick for today, but I like the look of both of them.

British American Tobacco shares are down 25% in five years, over fears for the end of tobacco. But I can’t see that happening in my lifetime, and the 8.5% yield looks tempting.

National Grid is another favourite, with its yield at 5.4% now as the price has fallen on fears for the gas part of the business. I have family members who own National Grid shares, and I really should buy some.

Insurance cash

But my pick today is in one of my all-time top sectors. I’m talking insurance, and Legal & General (LSE: LGEN).

I currently hold sector mate Aviva. But I’ve held Legal & General shares in the past, and probably will again before much longer. Actually, with an 8.5% yield, it might be very soon.

The shares have been sliding for a couple of years, in line with the financial mini-crisis around inflation and interest rates. But buy a sector when it’s down, that’s what I say.

Forecasts show decent earnings growth in the next couple of years, and the dividend rising to nearly 10% by 2025.

Second income

How much second income might Legal & General get me? I have to stress that there are short-term risks still, clearly while inflation is still so strong.

And there’s no guarantee behind dividend yields — they’re not at all like Cash ISA interest.

But what if the dividend and the share price remain the same for the next 10 years, and I invest a Stocks and Shares ISA allowance of £20k?

At the share price at the time of writing, I’d get 8,780 shares.

If I stash them away for a decade, and reinvest all my dividends, my initial £20k could more than double, to £45,220. And, at the same 8.5% return, it could then generate my £3,844 per year.

Eggs and baskets

Putting an entire ISA allowance into one stock adds some risk. But if I have good diversification over the years, that could even it out.

Then again, maybe a year’s ISA split between Legal & General, National Grid, Taylor Wimpey and British American Tobacco?

I like the sound of that.

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 Aviva Plc and Persimmon Plc. The Motley Fool UK has recommended British American Tobacco P.l.c. 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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