UK income stocks: a once-in-a-decade chance to get rich

The FTSE 100 contains a host of world-class income stocks and I’m buying as many as I can so I’m ready to retire within a decade.

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The FTSE 100 offers some of the best income stocks in the world. After a tough year for UK shares, many of them look too cheap to resist. I’ve been buying all I can afford, but still feel I’m missing out on the UK market’s untapped potential.

The UK stock market remains unloved and overlooked right now. Our economy has been through a rough ride. Brexit has changed perceptions. Investors everywhere have fixated on booming US tech stocks, almost at the expense of everything else.

As US mega-cap valuations become overstretched, I’m hoping some will turn their attention back to UK blue-chips. Income seekers like me have never lost faith.

Plentiful dividends on offer

As we saw at the end of last year, the FTSE 100 is likely to rally when investors anticipate that interest rates will start falling. After jumping the gun in November and December investors are wary today, but the first cut should still come by summer.

As that happy day edges closer, dividend stocks will look relatively more attractive as savings rates and bond yields fall. I don’t want to wait until the rally is under way before buying income stocks, as by then it will be too late and I’ll have to pay more for them as a result.

Purchasing ahead of a potential rally demands patience. I’ve no idea when it will arrive. The advantage is that I can reinvest my dividends at today’s low valuations while I wait for brighter days, and pick up more stock as a result.

Last week was poor for one of my favourite portfolio holdings, insurer and asset manager Legal & General Group (LSE: LGEN). I bought the stock twice last year, in June and September, and received my first dividend shortly after the second purchase. I ended 2023 around 15% to the good, which I considered a swift and nifty return.

Cheap stocks out there

I’m not feeling so clever today, with the L&G share price plunging 7.77% in a week. Over 12 months, it’s down 8.67%. It was hit by reduced rate cut expectations, and a negative report by broker Citi on Friday, which slashed 2023 earnings per share estimates by around 27% ahead of full-year results on 6 March.

Its verdict seems harsh but we’ll know more next month. What I do know is that L&G is even cheaper today, trading at just 6.1 times earnings, with a staggering forecast yield of 9.1%. I still believe the share price will recover when interest rates fall, and would buy more now if I had the cash to spare.

Like all the income stocks I buy, I plan to hold this one for a minimum of 10 years, and ideally for life. That way I can withstand short-term turbulence.

There are always risks to buying individual stocks. That’s why I’m buying a spread of at least of dozen of them, so if some underperform others may compensate. This is exactly what happened last week, when shares in another dividend growth stock I hold, Smurfit Kappa Group, jumped a mighty 10.97% on positive results.

I’m expecting to retire in around 10 years or so. This is my last push to build a large, balanced portfolio of income stocks, and I’m not hanging around.

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.

Harvey Jones has positions in Legal & General Group Plc and Smurfit Kappa Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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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