2 second income stocks I hope could make me an ISA millionaire!

These FTSE 100 stocks are popular with millionaire investors right now. Here’s why I think they could make me a huge second income too.

| More on:
Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper

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.

There are many strategies I can adopt in my quest to become a Stocks and Shares ISA millionaire. One of them could be by loading my portfolio with high-dividend stocks to supercharge my passive income.

An article from my Foolish colleague John Fieldsend recently caught my eye. Analysing data from AJ Bell, it showed which UK shares are most popular with ISA millionaires.

These can be seen in the table below.

RankStockForward dividend yield
1Shell4.5%
2Lloyds Banking Group6.5%
3GSK3.6%
4BP4.9%
5Aviva7.2%
6National Grid5.6%
7Haleon1.9%
8Scottish Mortgage Investment Fund0.5%
9Legal & General Group7.2%
10HSBC Holdings10.2%

Investing for dividends

As you’ll notice, the table is dominated by companies that pay above-average dividends. Only GSK, Haleon, and Scottish Mortgage offer dividend yields below the 3.8% average for FTSE 100 shares.

Buying dividend shares — and then reinvesting the payouts I receive — can be a great way to generate long-term wealth. This way I earn money on my initial investment and then on the dividends I reinvest. Over a period of decades this can add up to a seriously big sum.

Just ask one of the 4,000 people who have made millions in their ISAs. Of course there are many more dividend stock investors who made their fortunes outside of these tax wrappers, too.

A FTSE dividend share I’ve bought

I myself have packed my portfolio out with high-dividend shares from the FTSE 100 and FTSE 250. Life insurance giant Aviva (LSE:AV.), which is featured in that Top 10 list above, is one of these.

At 7.2%, it currently offers one of the largest dividend yields on the Footsie. But while the yields on some blue-chip shares look vulnerable, I believe payout forecasts here look pretty robust.

Profits could suffer if the tough economic climate keeps demand for its financial products under pressure. However, the company has a cash-rich balance sheet it can use to keep paying huge dividends. Its Solvency II capital ratio stood at 207% as of December.

I expect the passive income from Aviva shares to steadily rise over time, too. This should be supported by growing demand for wealth, insurance and retirement products as the UK, Irish, and Canadian populations rapidly age.

… and one more on my radar

In the coming months I’m hoping to add National Grid (LSE:NG.) shares to my ISA as well. It has the qualities needed to continue paying market-beating dividends over the long term, in my opinion.

The power transmission business doesn’t have competitors chipping away at its earnings. Demand for its services also remains stable at all points of the economic cycle. This in turn gives it the financial means and the confidence to pay a big (and usually growing) dividend year after year.

Indeed, its dividend yield rises to 5.8% over the next three years.

Keeping the UK’s electricity grid up and running is expensive business. But I’m confident the FTSE firm still has what it takes to keep its progressive dividend policy rolling, which in turn could make me massive returns over the coming decades.

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.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Royston Wild has positions in Aviva Plc and Legal & General Group Plc. The Motley Fool UK has recommended Aj Bell Plc, GSK, HSBC Holdings, Haleon Plc, and Lloyds Banking Group 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

Young Caucasian woman holding up four fingers
Investing Articles

7%+ dividend yields! 4 FTSE 100 shares for investors to consider buying in April

These FTSE shares offer dividend yields comfortably above the index average of 3.7%. Here's why they could be good passive…

Read more »

Dividend Shares

£10k in an ISA? Here’s how to generate a ton of passive income

Passive income can provide a lot more financial freedom and security. Here’s an easy way to generate some within an…

Read more »

Investing Articles

The Aviva dividend yield’s already over 7%. Could it go higher?

Christopher Ruane explains why he thinks the Aviva dividend could be on course to grow this year and beyond. Might…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

2 shares I’d buy to try and double my money in 10 years

Stephen Wright thinks there are still opportunities to to buy UK shares that can double in value over the next…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

NIO stock has crashed! Here’s why I still wouldn’t touch it with a bargepole

I've been watching NIO stock falling heavily, and wondering when might be a good time to get in cheaply. Here's…

Read more »

Investing Articles

Why have Rolls-Royce shares fallen this week?

Rolls-Royce shares remain the best performing on the FTSE 100 over the past year, but there's been some pullback. Dr…

Read more »

Investing Articles

With a 4.3% yield, I consider this FTSE company an exceptional investment

Oliver Rodzianko say this FTSE company is focused on quality and long-term survival. As such, he thinks he'll hold it…

Read more »

Investing Articles

How I’d invest £10,000 in a Stocks & Shares ISA and aim for a £45,500 second income

Millions of us aren’t earning the second income we deserve. Here, Dr James Fox explains how he’d get his savings…

Read more »