I’d buy 77k shares of this FTSE 100 bank stock to target a £1k monthly passive income

How can we aim to earn a long-term passive income? For me, it’s by buying dividend-paying Footsie stocks every time.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

How can we find the best UK stocks to buy for long-term passive income? Going for ones with good dividend track records is one way. And it can be even better if investors are avoiding them like the plague, and they’re cheap now.

Bank stocks seem to fit that bill in late 2023. They’re some of my top long-term buys anyway, and I’ll keep buying them


At times like this, I think of a quote from one of my top investors of all time.

Sir John Templeton once said: “It takes patience, discipline and courage to follow the contrarian route to investment success. To buy when others are despondently selling, to sell when others are avidly buying.”

He made an awful lot of money doing exactly that.

And if he saw a stock like Barclays on a price-to-earnings (P/E) ratio under five, I think he’d be filling his boots.


But I’m not looking at Barclays, the cheapest UK bank on that score today. It’s Banco Santander (LSE: BNC).

Santander isn’t on quite so low a P/E, but at 5.8, it’s still way down. There’s a dividend yield of 4.4% on the cards for this year, but broker forecasts have it above 6% by 2024.

For today, I’ll stick with the 5.3% down for 2024, seeing as we’re so close to the end of this year.

Past dividend darling

Banco Santander was once one of the top picks for long-term dividend investors. It used to pay out more than it does today.

And it had a scrip scheme, so we could take more shares instead of cash.

But it pushed it a bit too far, and created too much stock dilution. The current boss, Ana Botín, took the bank back to a more standard policy.

I think that makes it more sustainable now, and better for long-term passive income investors.

What if?

So what might a 5.3% dividend yield get me in the decades ahead?

To get my £1,000 a month passive income, I’d need a pot of around £226,000. That’s 77,000 shares at today’s price. I can’t cough up that much right now, for sure.

So long-term compounding it would have to be. What if I could put half a Stocks and Shares ISA allowance each year into Santander? That’s £10k per year, and I could reach my goal in 15 years.

Down to earth

In reality, if the dividend rises as expected, I expect the shares to gain too. Bigger dividends are good, but a higher share price would mean fewer new shares for the same cash each year.

I do think bank stocks could face a few more tough years yet. And I’ll only believe those future dividends when I see them.

So this is not a prediction. It’s just a ‘what if?’ that assumes everything stays the same.

But it inspires me to put as much as I can each year into my Stocks and Shares ISA. And, right now, banks are my top choice when I have cash to spare.

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 no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays 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.

More on Investing Articles

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

3 top FTSE 100 value shares I’d buy before August!

These FTSE 100 heavyweight shares have considerable long-term potential. And at current prices, I think they are too cheap to…

Read more »

Investing Articles

Here’s why I’m selling my Lloyds shares to double down on this FTSE 100 stock

Our writer digs into why he prefers HSBC over Lloyds shares right now, despite both performing really strongly in recent…

Read more »

Investing Articles

I’d invest £12,500 in this 1 stock to bag £1K of passive income!

Building a passive income stream through dividends is one of this writer’s biggest ambitions. Here’s how one stock could help.

Read more »

Investing Articles

3 cheap stocks to consider buying for the AI revolution

Investors looking for AI stocks to buy might be worried about high valuations amid current market euphoria, but these three…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Earnings up 20%! But this UK small-cap stock may just be getting started

Are we about to see enduring growth from this UK small-cap business with a rising stock price ahead over the…

Read more »

Investing Articles

1 FTSE 250 stock I’d give a wide berth… for now

One of the worst performers on the FTSE 250 index is a stock that Sumayya Mansoor has decided she won’t…

Read more »

Investing Articles

The FTSE 250 is brimming with potential, especially in stocks like this one

The main Footsie index gets all the attention but its little brother, the FTSE 250, is full of growth potential.…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

What on earth happened to the Premier African Minerals (LSE:PREM) share price?

The Premier African Minerals (LSE:PREM) share price is down a whopping 85% in the last year, so what happened? Gordon…

Read more »