FTSE shares have a global reputation for generous dividend yields, but how much passive income can an investor actually make after 10 years of drip-feeding £500 a month?
The answer varies depending on the strategy used. But by taking the right steps, an investor starting fresh today could potentially have up to £16,000 coming in without having to do any work for it.
Here’s how.
Exploring income strategies
The easiest and fastest way to start investing money in the stock market is with a FTSE 100 tracker fund. Historically, the UK’s flagship index has delivered close to 8% on average per year. So, how much money can an investor realistically expect to make?
Investing £500 each month at an 8% annualised rate compounds into a portfolio worth £91,473. However, at today’s yield of only 3.1%, that only translates into a £2,836 passive income, if the investor keeps the money in an index tracker.
Suppose it was instead reallocated to quality higher-yielding FTSE shares? In that case, a portfolio could go on to earn closer to a 6% payout without taking on too much excessive risk. And at this rate, the passive income jumps to a chunkier £5,488.
But investors can do even better…
Accelerating compounding
Instead of initially relying on an index fund to build up capital, investors can start picking top-notch stocks from day one, opening the door to potentially vastly superior results.
Atalaya Mining Copper (LSE:ATYM) is a perfect example of this in action over the last decade. Since March 2016, the FTSE stock has delivered a jaw-dropping 859% total return.
That’s the equivalent of 25.3% per year. And anyone whose been buying shares with £500 each month over the last decade now has close to £266,268 in the bank!
If that money were now reallocated to a high-quality 6% yielding portfolio, it would generate a far more impactful £15,976 passive income.
More growth to come?
Over the last 10 years, Atalaya has been steadily ramping up its copper production volumes through mine refurbishments and expansions, all the while prices of the red metal steadily climbed upward.
Yet today, the growth story is far from over.
Structural demand for copper continues to grow, driving the price of the red metal higher.
At the same time, the firm’s development stage Proyecto Touro project is only a few short years away from entering commercial production, adding another roughly 30 kilotonnes (kt) of copper volumes per year on top of the group’s existing roughly 50kt capacity.
Of course, success isn’t guaranteed. Proyecto Touro is still awaiting its final environmental permits. Even if they are issued in 2026 without delay, a realistic construction timeline for a mine of this size suggests production won’t realistically begin until 2029 at the earliest.
Until then, it remains entirely dependent on its flagship Cerro Colorado project, creating single asset concentration risk. As such, any unexpected disruptions to production could have a severe impact on its cash flow and financials – a risk investors need to consider carefully.
Nevertheless, given the growing importance of copper and Atalaya’s track record of solid execution, investors looking to invest in FTSE shares may want to take a closer look at this enterprise.
