There are different ways of trying to earn money without working for it. My own approach to building passive income streams involves buying shares in blue-chip FTSE 100 firms like M&G and British American Tobacco and hope they can pay juicy dividends for years or even decades to come.
There is another FTSE 100 share I own that currently offers a dividend yield of almost 8%. I regard the dividend as fairly secure and expect it to grow regularly in coming years.
If I wanted to target £1,000 in annual passive income, I would buy 4,916 shares in this well-known FTSE 100 firm today.
Big brand, big profits
The company is Legal & General (LSE: LGEN). Does the firm need an introduction? For many, no. Its long history and well-known umbrella logo mean it already enjoys widespread brand recognition.
That is part of its appeal to me as an investor. Having such a well-known name and brand has helped the company to build a large customer base.
That in turn has helped Legal & General develop a highly profitable business. But some other factors also work to its advantage. A focus on pensions, for example, means it is often able to hang onto clients for decades. Demand is high and resilient. The sums involved mean that even fairly modest fees or commissions in percentage terms can add up to a lot of cash.
Last year, the firm reported post-tax profits of £2.3bn.
A current market capitalisation of under £15bn means this FTSE 100 share is trading on a price-to-earnings ratio of under seven. That looks like a bargain to me, which is why I have been busy buying Legal & General shares this year.
Large, growing dividend
With its 7.9% dividend yield, I think the share offers me good passive income prospects.
The company has laid out its dividend strategy clearly. It aims to raise dividends annually by around 5%. It did that last year and the interim payout this year grew at the same level.
In fact, the company has grown its dividend most years across the past couple of decades. But there were exceptions. In 2020 it was held steady, while following the 2008 financial crisis it was cut.
Dividends are never guaranteed at any company, no matter how stellar its track record may be. Another financial crisis could see profits fall at Legal & General and that could lead to a dividend cut.
That said, as a long-term investor I think the company’s strengths ought to help it pay beefy dividends in future. Its dividend is comfortably covered by those huge profits.
The company is already a dividend gusher. If I had spare cash to invest today and wanted to use it to target a four-figure passive income in 2024 and years beyond, I would buy 4,916 Legal & General shares today.
