£12,000 in savings? I’d buy these 3 FTSE shares to target passive income

I’ve been looking for FTSE 100 shares with rising dividends that could be great buys for building up a long-term passive income portfolio.

| 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.

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.

I’ve been buying UK shares to secure passive income streams for some years, and right now I see a few very attractive options.

But with the stock market rising, forcing dividend yields down, what might I buy if I could start with £12,000 to invest today?

Lloyds Banking Group

I’ve always liked financial stocks. And I would have to choose one I already hold, Lloyds Banking Group (LSE: LLOY).

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

Created with Highcharts 11.4.3Lloyds Banking Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL6 Apr 20203 Apr 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202120212022202220232023202420242025202520406080www.fool.co.uk

Lloyds shares are doing well, up 25% so far in 2024, and that’s dropped the forecast dividend yield to 4.7%. So it looks like the best time to buy could be behind us.

The shares sell for 10 times forward earnings, and that might not be super cheap. But it would drop to only around seven times based on 2026 forecasts.

And by then, if the analysts are right, we could see the dividend up above 6% again. And whenever the chance arises, the board reminds us of its “progressive and sustainable ordinary dividend policy“.

This year is still a dangerous one, mind. Profits are down on last year, and the depressed housing market is hurting. Cautious investors might want to wait and see how 2024 turns out.

National Grid

I rate National Grid (LSE: NG.) as the best passive income stock I’ve never bought. And after the share price slumped in May, this might be one of my best chances ever.

Created with Highcharts 11.4.3National Grid Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The price fell after the firm launched its £7bn rights issue, which took the market by surprise. It’s all about expanding its energy infrastructure in the UK and US, as energy generation and storage move to new technologies. That seems like a good thing.

But those folk who want to be able to ignore their income stocks, expect them to never make waves, and just keep taking the dividends, seem to have been shaken by it.

It does, though, lift the forecast dividend yield to 6.1%, the best its been for some time, and that’s the key attraction.

My main fear is that, having done it once, National Grid might be bold enough to raise new capital again in the coming years. But I’d be happy to take that risk.

Taylor Wimpey

My third pick was tricky, as most of my top dividends now are all in financials, and I’d need diversification. But it has to be Taylor Wimpey (LSE: TW.), which has had a tough few years.

Created with Highcharts 11.4.3Taylor Wimpey Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Interest rates are high, and mortgages are expensive. And though rates seem likely to start falling, I can’t see the super low rates we enjoyed so recently coming back any time soon.

A tougher property market could hurt dividends. And that could in turn send the recent Taylor Wimpey share price mini recovery back down.

But two things would make Taylor Wimpey a passive income buy for me. One is a forecast dividend that’s still up at 6.1%. And the other is the UK’s long-term housing shortage. Hmm, didn’t the new government just say something about boosting construction?

Should you buy Legal & General now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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 positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

4 REITs Fools own for passive income

REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »