UK shares seem to be coming back in vogue. In the last couple of years, many companies listed on the FTSE 100 have seen their prices rise impressively. In 2025, the Footsie booked a 22% return – even outperforming Wall Street! Including dividends, the index has managed a 14% average return in the last three calendar years.
What’s the reason for the popularity? One factor is that British companies place a premium on returning cash via dividends compared to those in many other countries. A steady stream of dividends means cash in the bank compared to the less visible effects of share buybacks. It also makes it easier for people to work out the passive income potential of their investments.
Chunk of change
Let’s take a target passive income of £1,000 a month, or £12,000 a year. Using the FTSE 100 average dividend of 3.07% then an investor would need £390,879 in an ISA to achieve that goal. That’s a decent chunk of change. Can we bring it down at all?
One method is to prioritise dividend stocks. The yields at the top end of the index are 7% or higher, whereas there are a few stocks that pay no dividend at all. While dividends are never guaranteed, a target of 5% is what many investors feel is achievable over longer periods. That would require £240,000 in an ISA.
Of course, when it comes to investing, the secret ingredient is (cue my best Super Hans impression) time. A few years to let the cash snowball can really bring down the upfront costs. If an investor had put the cash in only five years ago then the same calculation (targeting 5% and adding in FTSE 100 growth and dividends over the period) would now need £129,729.
Attractive buy?
One stock that looks attractive to me today is Barclays (LSE: BARC). I think the bank is worth considering, and could offer great returns for passive income seekers in the years to come.
Banking stocks in general had something of a lost decade (or two) after the 2008 recession. Investors were put off by the risk on which crisis shone a spotlight. And near-zero interest rates made borrowing and lending barely profitable.
It seems like we might be past the hump though. The Barclays share price is up 192% since 2024. Earnings have been growing, in part because of higher interest rates. Dividends have been increasing, and billions have been earmarked for share buybacks.
While higher interest rates were supposed to be a temporary blip, it seems like they might be here to stay. The markets are currently pricing in a rates hike by the Bank of England by the end of the year as the rising oil price suggests inflation is going to rise too.
The last word? Investing is messy, and targeting a specific goal like £1,000 a month rarely (if ever) goes exactly to plan. But there will always be excellent opportunities in the stock market to grow and build passive income and I think Barclays might be one of those to think about today.
