I’m always hunting for passive income opportunities. Looking at the UK stock market, I’ve identified three FTSE 100 shares I’d buy to create a nice second income if I had a spare £15,000 to do so.
National Grid
National Grid (LSE:NG) shares recently fell after underwhelming earnings and a dividend rebasement.
Gross revenue declined by 10% while operating profit also fell by 11%. A particular concern for me is also the £44.8bn of debt on its balance sheet.
However, the company is still the key electricity distributor for the UK and I expect demand for electricity to continue rising over time.
Furthermore, management is planning to invest £60bn between now and 2029 to address the debt problem. It will be used on projects, such as the decarbonisation of its energy infrastructure. This should improve supply and lower bills for consumers through efficiency, ultimately bolstering its long-term economic growth.
Moreover, the dividend rebasement (arising from its £7bn rights issue) isn’t as perilous as it first seems. The dividend yield is expected to dip to 5.3% in 2025 but is expected to grow from there.
This is still far superior to the average FTSE 100 yield of 3.6%, making it a great share to generate a stable second income.
Aviva
Aviva (LSE:AV) shares have had a strong 2024 so far, climbing by 11%. This has outperformed the Footsie that has only increased by 6%.
And there’s a reason why. In its latest accounts, gross written premiums have risen by 13% year on year and operating profit rose by 9%.
The company currently boasts a dividend yield of 7%. My (hypothetical) £15,000 invested in it would therefore make roughly £1,050 in annual income. Not bad at all! With a strong track record of it raising dividends, this is likely to rise over time too.
There are risks with Aviva. It’s a naturally cyclical business due to its involvement in the financial services sector. Therefore, in economically fragile times, some people might not be able to afford to take out insurance policies.
However, the opposite is true when the economy performs well and that seems to be turning a corner in the UK. With inflation also falling, now might be a good time for me to grab some of its shares.
Legal & General
To finish off, I’ve chosen another financial services firm. But Legal & General (LSE:LGEN) shares have seen different fortunes, falling by over 8% in 2024.
The company recently announced a restructuring with new financial targets, including international growth, particularly in the US. It believes this could increase operating earnings per share by 6%-9% annually between 2024 and 2027.
This announcement didn’t fly well with investors though, as the firm cut the expected annual dividend growth rate to 5% in 2024 and only 2% between 2025 to 2027.
However, this doesn’t concern me so much as the company already possesses a monster dividend yield of 9%. My £15,000 invested in this stock would therefore make me roughly £1,350 annually.
My one concern is that there’s always a risk that expanding abroad may not be executed well. But sometimes to fuel growth a company has to take risks, so this could also be an opportunity that is good for its earnings.
