I’m looking to generate a high and rising second income from a portfolio of FTSE 100 shares to fund my retirement. Now looks like a great moment to do it, ahead of the annual 5 April deadline for contributing towards this year’s £20,000 ISA allowance.
The Stocks and Shares ISA wrapper’s a great way to invest in equities because all share price growth and dividend income is tax-free for life. On death, unused pots can even be passed onto a spouse or civil partner, with the tax advantages intact.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Stock markets are volatile right now, due to the conflict in Iran. That will scare many investors away, but in fact today could actually be a good time to invest.
FTSE 100 buying opportunity
At The Motley Fool, we think stock market volatility as a good opportunity to snap up shares, because they’re suddenly cheaper than they were. Not just that, but they pay more income too. Yields are calculated by dividing the dividend per share by the share price. When share prices fall, yields automatically rise. We’re seeing that again now.
Today, two FTSE 100 stocks offer eye-popping yields. Insurer and asset manager Legal & General Group has a trailing yield of 8.8%, while insurer Standard Life, until recently called Phoenix Group, yields 8.1%.
This is roughly twice what investors can expect from a market-leading savings account. Plenty of other blue-chip stocks have supersized yields including wealth manager M&G at 6.9%. I actually hold all three. They’re all financial services stocks, so I need to diversify my income sources by investing in another sector. What about Land Securities Group (LSE: LAND), also known as LandSec? It pays some of the most generous income on the index.
LandSec’s one of the UK’s largest commercial property owners and developers, with a diversified portfolio of offices and shopping centres. Lately, it’s had a tough run, hit by trends beyond its control. They include online shopping, the work-from-home trend, and the cost-of-living crisis. The ailing UK economy has also knocked profits from property disposals.
Land Securities’ shares tempt
At today’s price of 600p, LandSec shares trade at roughly half their level 10 years ago. The shares were starting to recover, but rising oil prices and inflation have knocked them back. They’re down 9% in the last month. One positive is that LandSec shares now look good value, with a price-to-earnings ratio of just 11.8. The dividend yield has climbed to 6.8%.
Obviously, there are risks, especially if the Iran conflict drags on. This could fall further, or the dividend could come under pressure. I think it’s worth considering for income-focused investors who understand this niche sector. If not, I can see plenty more nicely-priced passive income stocks on the FTSE 100 today.
