Those with a full record of National Insurance contributions can currently receive a State Pension of £12,548 a year.
But according to experts, a single person needs an income of £13,400 to provide for a basic retirement. For those seeking a moderate standard of living in old age, £31,700 is required. Worryingly, this is £19,152 more than the State Pension.
However, by using a Stocks and Shares ISA, I reckon it’s possible to make up this shortfall (and more). Let me explain.
What do the numbers look like?
An ISA worth £209,133, paying dividends at 6%, would generate £12,548 a year. Add this to the full State Pension and it could provide a retirement income of £25,096.
To generate £19,152 – which would give £31,700 when combined with the maximum State Pension — a retirement pot of £319,200 is needed.
How might this be achieved? By way of example, investing £266 a month for 25 years, growing at 7% per annum, could build an ISA of £209,133. Increasing this to £406 would produce an ISA valued at £319,200.
But is it really possible to earn 6% in dividends each year? I think so.
Lots on offer
There are presently (26 April) 89 UK stocks offering a yield of 6% or more. Obviously, dividends cannot be guaranteed. And in some cases a high yield could be a warning sign that it’s unsustainable.
However, companies with low debt levels, limited capital expenditure requirements, and strong cash flows are well placed to return a significant proportion of their profit to shareholders.
And if they’re in a stable industry where rapid growth is unlikely, their share prices often trade at relatively low levels and their yields remain above average.
Such as?
One company that meets this description is James Halstead (LSE:JHD). As a global manufacturer and supplier of flooring to commercial and residential customers, it tends to fly under the radar. Yet its current dividend yield of 6.4% is worthy of a few headlines.
Apply this to a £209,133 ISA and it would produce a healthy income of £13,385 a year.
Impressively, after first returning cash to shareholders in 1979, it’s increased its payout every year since.
However, it’s struggled since the pandemic. Both the group’s costs and the spending power of its customers were affected by post-Covid price rises. Of concern, the current Middle East conflict raises the spectre of inflation picking up again.
And with a market-cap of £570m it’s a relatively small company, which makes it vulnerable to a prolonged downturn.
| Financial year | Dividend (pence) | Share price (pence) | Yield (%) |
|---|---|---|---|
| 30.6.25 | 8.80 | 160 | 5.5 |
| 30.6.24 | 8.50 | 183 | 4.6 |
| 30.6.23 | 8.00 | 211 | 3.8 |
| 30.6.22 | 7.75 | 203 | 3.8 |
| 30.6.21 | 7.63 | 260 | 2.9 |
| 30.6.20 | 7.13 | 259 | 2.8 |
| 30.6.19 | 7.00 | 257 | 2.7 |
| 30.6.18 | 6.75 | 201 | 3.4 |
| 30.6.17 | 6.50 | 234 | 2.8 |
| 30.6.16 | 6.00 | 205 | 2.9 |
Final thoughts
But its recent woes mean its share price has drifted lower and – relative to earnings – become much cheaper.
For the year ended 30 June 2025, the group reported earnings per share of 9.7p, giving a historic price-to-earnings (P/E) ratio of 14.1. This is comfortably below its five-year average (median) of 19.5.
In light of this, I think now could be a good time to consider taking a position. Despite its recent challenges, the group has no debt and continues to earn a healthy margin. It also has a global customer base. And then there’s its impressive dividend history.
I think the flooring market and James Halstead’s share price will pick up soon. If I’m right, the stock’s attractive yield might not be on offer for much longer.
