If an investor put £10,000 into Rolls-Royce (LSE:RR.) shares on 30 September 2022, at just 69.59p apiece, they would have £174,091 today.

The company’s shares exploded by a phenomenal 1,640.9% in that period. That’s an incredibly impressive run-up, which would have changed the lives of many investors.

However, while it certainly was then a once-in-a-decade opportunity, is it still so?

Let’s be realistic

The market capitalization of the aircraft engine manufacturer when its shares started this great run was around £5.8bn. The market cap now is £99.5bn.

Even if it didn’t match its previous performance, and its shares just went up 10 times, the firm would almost be a trillion-pound company.

Its price-to-earnings (P/E) ratio of 36.8 on 2026’s projected earnings is already very expensive. But even if it were to match that high P/E as a trillion-pound company, it would still need to make £27.2bn in profit.

With trailing 12-month revenue of only £19.5bn in comparison, that’s a very big ask for the firm right now. And with its 29.6% profit margin over the same period, it would need to generate £91.7bn in revenue to make this profit. This is almost five times the current amount.

A compounded annual growth rate of 16.7% is required to achieve this over the next decade. With revenue up by 7% in its latest half-year results, it’s nowhere close to making this happen.

And its profit margin has been boosted recently by significant financing income, meaning the growth rate needed from operations may be much higher.

At the same time, it needs to maintain the same expensive valuation.

I believe it’s highly unrealistic for the company to do all of this.

That’s why I don’t believe the company’s shares are a once-in-a-decade opportunity anymore. However, I still believe Rolls-Royce shares could be a great investment in the long term.

Still plenty to like

There are still plenty of reasons to like the aircraft engine manufacturers’ shares, though.

These include the continued strong performance of its civil aerospace division since the pandemic, and the unfortunate reality that global conflicts seem to be on the rise, which will be beneficial to Rolls-Royce’s defence division.

But the one area on which I want to focus my discussion on is the company’s potential with small modular reactors (SMRs).

SMRs are a technology that could revolutionise the way nuclear energy is deployed. It turns the power source into a commoditised factory-built product. This is much cleaner for the environment than traditional nuclear energy plants.

It should be noted that SMR technology is untested in its effectiveness, so it would be very bad for the company’s share price if it were found to be ineffective.

However, this aside, the opportunity is anticipated to be massive. With 400 SMRs expected to be needed by 2050, costing $3bn each, this could be a trillion-dollar industry.

Rolls-Royce is already making huge strides in this space. It already has agreements with the UK and the Czech Republic to supply them with SMRs.

Ultimately, while no longer a once-in-a-decade opportunity, if the company continues executing well in this industry, its shares could be a big winner for investors over the long term. Therefore, they should consider buying them.

The post Are Rolls-Royce shares still a once-in-a-decade opportunity? appeared first on The Motley Fool UK.

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• Here’s what £5,000 invested in Rolls-Royce shares at the start of 2023 is worth today
• Is Rolls-Royce stock quietly turning into a green energy play?
• Get ready for Rolls-Royce shares’ next move higher

Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce 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.

2026 has just begun, and investors may be wondering how they can start to make passive income this year.

One great way to achieve this is to consider investing in stocks, especially dividend stocks, with high and reliable yields.

Through a Stocks and Shares ISA, this can be achieved in a tax-efficient manner. Up to £20,000 a year can be invested into this type of account. What’s so sweet about it is that the dividends received are exempt from tax.

Furthermore, if you decide to sell your stocks, the gains are exempt from capital gains tax.

Let’s see how an investor could build a passive income machine from this that could target a monthly income of £1,800.

Also, I’m going to look at a great dividend stock to consider buying for this portfolio.

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.

How to target £1,800 a month

Now, to target a second income of £1,800, it will be helpful for investors to aim for a high dividend yield in their passive income portfolio.

For example, the FTSE 100 as a whole yields 3%, but I believe it’s very possible to achieve a dividend yield of 5% by focusing on high-yield stocks.

With this in mind, investors would need £432,000 today to make £21,600 a year, which translates to £1,800 a month.

This is a substantial sum; I doubt many readers have that much spare to use.

However, if an investor starts by using a much more reasonable £14,000 of our ISA allowance today, and then invests £500 a month into our portfolios, they could make this sum within 12 years.

This is based on some conservative assumptions that both the dividends and value of shares increase by just 2% per year. Dividends will also need to be reinvested.

By the end of the twelfth year, £521,917 would have been saved up. With this amount, investors could make even more than £1,800. They would make £2,174.65.

It’s important to bear in mind that dividends aren’t guaranteed. But it’s still an interesting analysis of how making additional income over time is possible.

Let’s now look at Legal & General (LSE:LGEN) shares. With its juicy dividend yield of 8.2%, it’s the highest-yielding stock in the Footsie. It therefore perfectly fits the description of what is needed in our passive income investor’s portfolio.

Legal & General

With Legal & General shares, an investor would only need £263,415 to target their £1,800 second income.

This would only take just over nine years to save up based on the conditions above.

Having a diversified portfolio is important, though, so the company’s shares could be used to pull the average yield of the portfolio up, as opposed to all of it being concentrated on this one stock.

Moreover, the financial services firm has an incredibly strong track record of growing its dividend. Since 2009, it has only failed to do this once, and that’s when it maintained it due to the pandemic.

However, it should be noted that the company has a low dividend cover of only 0.94. This means it’s paying out more in dividends than the profit it’s making.

If earnings weaken, this could make the dividend vulnerable. That said, I still think it’s worth an investor to consider buying some Legal & General shares as part of a diversified portfolio.

The post How much do you need in an ISA to target £1,800 a month of passive income? appeared first on The Motley Fool UK.

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Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The Vodafone (LSE:VOD) share price increased by 41.4% last year. But its long-term performance has still been quite disappointing.

In fact, over the last five years, the company’s shares have declined by 19.5%.

Right now, the share price is trading at around £0.97. It was at £0.69 at the start of 2025. Can it rise by a similarly impressive performance in 2026 to reach £1.50?

Well, it hasn’t done so since before the pandemic in February 2020. However, it’s not impossible.

Opportunities

Vodafone’s most recent half-year results for FY26 show impressive performance by the company.

While organic service revenue growth in Europe and Germany remains an issue, the company’s growth drivers in Turkey and Africa remain strong.

Organic service revenue grew by 55.6% year on year in Turkey to reach €1.3bn in the period. Its Africa service revenue grew by 13.7% to hit €3.2bn.

In Africa, it now has 94m financial services customers. There are about 1.5bn people on the continent, and if the company is able to capture a similar proportion of the market as it does in Europe and the UK, this could drive up revenue and earnings massively.

Overall, this has contributed to total revenue rising by 7.3% to €19.6bn. Adjusted EBITDA (which includes depreciation of leased assets) also increased by 5.9% to €5.7bn.

Concerns

I have some concerns with the business, though. As mentioned above, service revenue from its largest market in Germany declined by 1.4% to €5.7bn.

This is concerning because it’s a long-term trend. The one caveat is that in the second quarter, it actually picked up by 0.5%, ending many quarters of decline. But it’s still something for investors to be wary of.

Furthermore, currency fluctuations may hinder the firm’s performance as it’s so geographically spread out.

While the organic revenue was impressive in Turkey and Africa, the actual revenue rises of 20.3% and 7.9%, respectively, are far less impressive. This is because of the depreciation of the respective currencies in these regions.

If currency depreciation continues to occur in these growth regions, then the impacts of growth will simply be mitigated. This won’t be good news for investors in its shares.

Prediction

Before making a prediction, it’s important to put the firm’s valuation into context. With a price-to-earnings ratio (P/E) of 15.2 for 2026, I think the Vodafone share price isn’t high at all.

Moreover, the P/E is meant to decline to 13 in 2027 and 11.8 in 2028.

With the average FTSE 100 P/E ratio of 18.2, it suggests a certain level of undervaluation for the company’s shares.

A lot will hinge on its growth drivers, but if it can maintain the revenue and earnings growth that is projected, I think the company’s share price could hit £1.50 by the end of the year.

Therefore, I think investors should consider buying some of its shares.

The post Can the Vodafone share price reach £1.50 in 2026? appeared first on The Motley Fool UK.

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Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone Group Public. 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.

Barclays (LSE:BARC) shares have been a tremendous investment for holders in recent years. The price increased by an incredible 76.8% last year.

Over the last five years, they’ve generated an even lovelier gain of 221.7%. Investors would have been very pleased during this period.

However, I’m sure the question on most investors’ minds when it comes to the company’s shares is whether they can perform a similar feat in the coming year.

Interest rates

Barclays has seen such strong performance in the last couple of years, in part because of interest rates increasing from 0.1% in December 2021 to 5.25% in August 2023. This high interest rate was then maintained for another year.

This allowed Barclays to benefit from an expanding net interest margin, as the rates it charged to consumers increased more quickly than the costs of deposits held by the entity paid to them.

Ultimately, this helped to boost the banking giant’s profit.

However, we’re now entering the opposite scenario, as the Bank of England is cutting rates in an attempt to stimulate the UK economy. Just recently, interest rates were cut to 3.75%, with more expected this year.

This has a contracting effect on the net interest margin, as interest paid on deposits falls more slowly than interest charged to consumers on loans.

Diversified global business

What I like about Barclays is that the bank is more diversified than many of its UK peers.

For example, Lloyds is significantly more exposed to UK interest rates, as Barclays also has operations in the US. Therefore, falling interest rates in the UK will have less of an impact on it.

Furthermore, the business also has a significant investment banking and wealth management division. This means that if interest rates continue falling, the company has other operations it can fall back on for growth drivers.

Looking at investment banking on its own, it grew by 12% for the first nine months of 2025 to hit £10.3bn in revenue. It was also almost half of the firm’s total revenue of £22.1bn.

That said, even these services contain some levels of interest income, so these divisions in the bank will still be affected, although not too heavily. In its latest period, net interest income was only £978m of total revenue from investment banking.

Valuation and takeaway

Now, when assessing whether Barclays shares can do it again this year, we need to put its valuation into context.

The company is currently trading with a forward price-to-earnings ratio of 8.1. This is very cheap.

However, I’m not so optimistic about the firm’s performance this year. In fact, I don’t think it will come anywhere close to repeating the magnificent performance of the last few years.

I don’t think the shares will decline because they are pretty cheap.

But falling interest rates isn’t an environment that’s conducive to helping the firm flourish right now. Furthermore, while the UK economy isn’t in a great position at the moment, neither are other major global economies, such as the US, where Barclays also has major operations. Therefore, other services such as wealth management and investment banking may also struggle.

Therefore, I think investors may want to consider looking elsewhere to generate strong returns in 2026.

The post Can Barclays shares do it all over again in 2026? appeared first on The Motley Fool UK.

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Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc and 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.

As the new year starts, investors are probably wondering what the best FTSE 100 stock to invest in is.

Last year, it was the mining company, Fresnillo, that was the darling of the index, after its 394.8% rise.

I turned to ChatGPT to see what it thought was the best company to invest in the Footsie for 2026. Surprisingly, it mentioned a stock I hadn’t even considered.

The stock in question is AstraZeneca (LSE:AZN). Let’s see below why I’m not so sure about the generative AI’s suggestion.

I’m not so sure…

While I think that AstraZeneca is a great company, it’s the reasons provided by ChatGPT that I’m not so sure about.

The first reason mentioned is the pharmaceutical giant’s strong share price performance of about 30% in 2025. The problem with this is that it is a very basic analysis and ignores the principle that just because a company has performed well in the past, it doesn’t mean it will in the future.

Furthermore, some of the other key reasons it mentioned don’t make sense to me. For example, it said the company has a valuation appeal. With a price-to-earnings (P/E) ratio of 30.9, I don’t believe its shares are valued cheaply at all. I think ChatGPT has it wrong here.

That said, there are things to like about the company. Notably, it has a strong pipeline of new pharmaceutical drugs that could drive up revenue and earnings if regulatory approval is granted.

However, because of valuation concerns and some other factors, such as the company having $24bn of net debt on its balance sheet, I don’t think it will turn out to be the best FTSE 100 stock for 2026.

A dirt-cheap alternative

My pick for 2026 is another mining stock, like Fresnillo. I think Rio Tinto (LSE:RIO) could be a great stock for investors to consider in the coming year.

With a P/E of only 13.1, it’s far cheaper than AstraZeneca. But what appeals to me the most is that it’s not priced like an AI stock, while being a potential big winner as the AI market continues growing.

How did I make this link with AI, you may be wondering right now?

Well, huge sums of money are anticipated to be spent on AI infrastructure over the next few years. For example, $3trn is expected to be spent on AI data centres through to 2029.

This presents a great opportunity for Rio Tinto, which is a key miner and producer of two of the key metals needed to make this happen: aluminium and copper.

Its Oyu Tolgoi mine in Mongolia hosts one of the world’s largest known copper deposits. This puts the miner in a strong competitive position.

There are risks with holding shares in the metal miner. For example, commodity price fluctuations could have a big impact on the company’s earnings, which could hurt its shares if there are adverse movements in metal prices.

Overall, though, I still think Rio Tinto shares are among the most compelling in the FTSE 100 over the coming year. Therefore, I think investors should consider its shares.

The post I asked ChatGPT for its top FTSE 100 stock for 2026, and it said… appeared first on The Motley Fool UK.

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Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca Plc and Fresnillo 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.

Rolls-Royce (LSE:RR) shares continued their impressive run of the last few years in 2025. Last year, the company’s shares saw a massive 95.4% gain.

If an investor put £5,000 into its shares at the start of this run, they would have £9,768 today.

What’s even more insane is that the aircraft manufacturer has seen its shares soar by 1,133.4% since the start of 2023.

Our £5,000 investor would have seen the value of their shares hit £61,670 in that time. By now, you probably get the power of investing in high-quality shares over a number of years.

However, can Rolls-Royce shares have another year to remember for its shareholders? More specifically, can they grow by a further 47.9% to £17?

Long-term growth drivers

Over the long term, Rolls-Royce has plenty of catalysts that can maintain the company’s upward trajectory.

Firstly, the company’s largest source of revenue, its civil aerospace division, is continuing to see superb growth since the pandemic a few years ago. In its latest half-year results, revenue from the segment increased by 17% year on year.

Furthermore, air travel demand is expected to continue growing, with passenger traffic estimated to increase by 4.9% in 2026. This is good news for the aircraft engine manufacturer.

Secondly, and most unfortunately, global conflicts have been on the rise. With NATO countries committing to raising their defence budgets to a higher proportion of their GDPs as a result, Rolls-Royce’s defence division could benefit.

Thirdly, and most excitingly in my opinion, is the firm’s investments in small modular reactors (SMRs). The company is doing very well in this field, where it already has agreements with governments, such as the UK and Czeck Republic, to provide them with SMRs.

This is a technology where nuclear energy moves away from a large and complex infrastructure project into a commoditised factory-built product. There are many benefits to it, such as it being cleaner for the environment.

Anticipation is that this will be a huge industry. Four hundred SMRs are expected to be required globally by 2050, with each costing $3bn.

AI and its data centres will also need to be powered. This provides a huge opportunity to Rolls-Royce SMR and its power division, which grew 20% in its latest half-year results.

Concerns

I have a couple of concerns with respect to Rolls-Royce shares.

Notably, the SMR technology discussed above is unproven in terms of its effectiveness. So, while it’s an exciting prospect, it could also be detrimental to the company’s share price if it’s not effective.

Moreover, the firm’s shares are pretty expensive. They currently sport a price-to-earnings ratio of 36.5. If its share price rises by 47.9% to hit £17, it will become even more expensive. This is especially the case as its earnings are only forecast to grow by 15.8% in the next financial year.

Prediction

I think Rolls-Royce is an excellent company that could be a great long-term investment.

However, I don’t think it will come anywhere close to reaching £17 by the end of the year. This primarily stems from my valuation concerns.

If the inconsistency between the share price and earnings growth continues, it will make its shares too expensive.

Therefore, I think the company’s shares will stabilise around the current price by the end of the year.

The post By the end of 2026, can Rolls-Royce shares hit £17? appeared first on The Motley Fool UK.

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Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce 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.

The Lloyds (LSE:LLOY) share price has been one of the outstanding performers in the FTSE 100 in 2025. Investors in the company’s shares can smile after its 76% rise year to date.

In fact, since the start of 2024, shares of the banking giant have increased by a very impressive 103%.

However, the question on most investors’ minds will be whether the firm can continue to achieve such excellent returns next year.

Read on to find out.

Lowering interest rates

It’s very important to understand the impact of interest rates on Lloyd’s business. As a bank, its income is heavily determined by the interest rate set by the Bank of England (BoE).

Between December 2021 and August 2023, the BoE consistently increased interest rates from 0.1% to a high of 5.25%. It then maintained this high for a year until August 2024.

This was very beneficial to Lloyds, as it allowed it to raise the interest rates it charged to consumers faster than it raised the costs of the deposits it holds. This gap, called the net interest margin, helped boost its profit.

However, we’re now in the middle of a rate-cutting environment by the BoE. Just last week (18 December), rates were cut again to 3.75%. More rate cuts are expected in 2026.

This has the opposite effect to interest rate rises, as it compresses the net interest margin made by the bank. Interest made on loans typically falls at a quicker rate than interest paid on deposits.

For this key reason, the Lloyds may not hit the same level of returns in 2026 that it has over the past couple of years.

Other factors to consider

Not all is about interest rates, though. There are plenty of reasons to like the bank. For example, it’s the largest retail bank and mortgage lender in the UK.

For those investors who are bullish on the UK economy, this could be a great thing. This is because it will translate into more demand for more of its services, which means the bank can accrue more fees.

But the opposite is also true. When economic times are tougher, consumers could cut back on spending, which could adversely impact the company’s earnings.

With higher taxes and cost-of-living pressures persisting, I believe we’re about to enter this kind of environment.

London property prices falling by 2.4% in the year to October is a strong indication of this. It means people are trying to sell their properties amid lower demand. As the largest mortgage lender in the country, this isn’t good news for Lloyds, and in turn, holders of Lloyds shares.

Prediction

The conditions for Lloyd’s shares to prosper have been present over the last couple of years. If the UK economy enters a period where it thrives, I would be very bullish on the company’s shares.

Unfortunately, I don’t believe that year will be 2026. Cost-of-living pressures are becoming tighter, combined with lower interest rates. These aren’t conditions for the bank to continue doing well in.

However, its shares aren’t expensive either. With a forward price-to-earnings ratio of 11.5, I think they will remain relatively stable in 2026, just not repeat the same feats from the last two years.

That’s why I think investors should consider holding, but not necessarily buying its shares.

The post Can the Lloyds share price do it again in 2026? appeared first on The Motley Fool UK.

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Muhammad Cheema has no position in any of the shares mentioned. 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.

From the start of 2025, Tesco (LSE:TSCO) shares have returned 17.1% to investors. Therefore, £5,000 invested would have turned into £5,852.50.

Doing a quick Google search, the average cost of Christmas for a UK family is around £600-£700. For higher earners, this can be over £1,000. Either way, the £852.50 gain would have made a significant contribution.

But if investors put £5,000 in Tesco’s shares today, will it help to cover the cost of Christmas by next year?

Valuation and dividends

Right now, Tesco has a forward price-to-earnings (P/E) ratio of 15.2. While this isn’t necessarily expensive, it’s not ridiculously cheap either.

However, when compared to fellow Footsie constituent Sainsbury’s, it looks like it’s on the cheaper side. With a P/E of 21.5, Sainsbury’s shares suggest some undervaluation of Tesco’s shares.

Furthermore, after a 12.9% increase in its interim dividend, the company’s shares now boast a dividend yield of 3.5%. If we combine last year’s final dividend of 9.45p with this year’s interim dividend of 4.8p, we obtain a total annual dividend of 14.25p per share.

Now, with its current share price of 436.24p, investors can buy 1,146 of its shares with £5,000. That means, they can obtain £163.31 just from the supermarket’s dividends. Therefore, they can rely less on the share price to help pay for next year’s Christmas shopping!

It’s important to remember that dividends aren’t guaranteed. Though, the company does have an impressive track record of raising its annual dividend since 2017. So, it’s possible that investors could make even more passive income.

Risks

There was plenty to like in Tesco’s recent half-year results. Notably, group sales increased by 5.1% to £33.1bn. Free cash flow also increased 2.9% to £1.3bn.

However, I also see some concerns arising from its results. Group operating profit only increased by 1.5%, less than sales. This suggests margins are being squeezed by a combination of higher inflation and cost-of-living pressures.

If these issues persist, I think the UK’s largest supermarket could face even more problems with its margins. In this scenario, it might be forced to raise its prices. Consumers could turn to cheaper alternatives like Aldi and Lidl as a result, which could reduce Tesco’s market share.

Moreover, net debt has climbed by 3.8% to £9.9bn, which I believe investors should be cautious of.

Prediction

As free cash flow is growing, I believe that Tesco is in a decent position to continue raising its dividend.

Furthermore, there may be some scope for a share price increase as its P/E isn’t that high.

However, investors must remember that the company’s shares have had three strong years. They have grown 17.1% so far this year, 50.1% since the start of 2024, and 94.5% since the start of 2023.

While this can be justified with its earnings growing from £737m in FY23 to £1.6bn in FY25, I think cost-of-living pressures and inflation will persist until next Christmas at least. This could create issues for its margins and earnings growth.

Ultimately, I think its shares will remain near their current position and may see a modest share price increase of about 5% in an optimistic scenario.

Therefore, a £5,000 investment could turn into £5,250 by next Christmas (plus the dividends). That’s why I think investors should consider potentially looking elsewhere to fund next year’s Christmas.

The post Prediction: next Christmas, £5,000 invested in Tesco shares could be worth… appeared first on The Motley Fool UK.

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Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has recommended J Sainsbury Plc and Tesco 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.

As we approach closer to 2026, investors may be looking for new ways to make passive income.

I believe buying shares is one great way to achieve this. This is because investors only need to research the companies they’re invested in, not manage them.

One tax-efficient way to buy shares for this purpose is to use a Stocks and Shares ISA. You can invest up to £20,000 a year into one, and the dividends received are be tax-free.

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.

By investing consistently over time, it’s possible that investors could make a sizeable additional income.

So, how much would you need to aim for £5,555 a month? And what shares may help achieve this?

A plan for passive income

To achieve a passive income of £5,555 a month, investors need to consider high-yielding dividend stocks.

If we target an average portfolio yield of 5%, £1,333,200 would be needed to generate this second income straight away. It’s important to bear in mind that dividends aren’t necessarily guaranteed.

However, I doubt many reading this have that amount of spare cash to use right now. Even if you do, only £20,000 can be invested in an ISA annually to get the benefit of tax-free dividends.

However, it can still be achieved over time. For example, if investors set aside a more reasonable £20,000 initially, and then invest £1,666 a month, they could hit £1,341,746 in 24 years. That’s more than enough to generate £5,555 a month.

Crucially, the £1,666 monthly investment means it’s just under the ISA limit. Moreover, this is computed under some pretty conservative assumptions, notably that annual share price and dividend growth are only 2%. Investors would also need to reinvest their 5% dividends.

A juicy 6.7% yield

As mentioned above, an average yield of 5% could help to generate an investor’s passive income machine. That’s why Pfizer (NYSE:PFE) is a good share to consider, with a handsome 6.7% dividend yield.

Since the start of 2025, the pharmaceutical giant has seen its shares fall by 3.2%. Considering the S&P 500 has gained 16.7% over the same period, this has been disappointing.

However, savvy investors will understand that the cost to obtain the future stream of Pfizer’s dividend is now 3.2% cheaper than it was at the start of the year. Furthermore, its yield is far superior to the S&P 500’s 1.1%.

It also has a strong track record of raising its dividend year on year. It’s now increased every year since 2010.

There are some risks with respect to the company. The biggest is that it has several patents coming to an end over the next few years.

For example, Eliquis, its top-selling medicine, is set to lose its patent exclusivity in Europe in 2026 and in the US in 2028.

However, I still believe the firm’s long-term prospects remain strong. This is because it has plenty of exciting candidates in its pipeline, such as its PF-4044 medicine, which management believes could be used to treat various types of cancer.

While the company may have struggled with growth over the last few years, I believe it has solid foundations to bounce back and resume growth. That’s why I believe investors should consider its shares.

The post How much do you need in an ISA to target a £5,555 monthly passive income? appeared first on The Motley Fool UK.

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Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I think I’ve just found a FTSE 100 stock that could be a big winner as the AI market booms over the next few years.

What’s even more impressive about this stock is that it only has a price-to-earnings (P/E) ratio of 11.3.

Considering that investors’ biggest fears about AI stocks are their sky-high valuations and a potential bubble bursting, I think this share is a great alternative to consider.

The company in question is Rio Tinto (LSE:RIO). However, I can understand that the question on many readers’ lips right now is: how on earth is a mining and metal company set to benefit from AI?

AI infrastructure demands

Huge sums of money are expected to be spent on AI infrastructure.

It’s estimated that $3trn will be spent on AI data centres through to 2029. The AI chip market is also set to explode at a compounded annual growth rate of 37% to $445bn by 2035.

In order to make this happen, a lot of metals will be required. Copper and aluminium are two key ones identified.

Rio Tinto, as the third-largest mining company in the world, is in an excellent position to benefit from this. The mining and production of these two metals are two key segments of its operations.

The FTSE 100 firm is also in an excellent competitive position, especially with respect to copper. In its third-quarter production results for 2025, Copper output was 10% higher than a year ago.

Moreover, it operates the Oyu Tolgoi mine in Mongolia, home to one of the world’s largest known copper deposits. At its peak, this mine is expected to generate 500,000 tonnes annually and be run for decades to come.

Already starting to see benefits

The company is already starting to see great benefits from the increased demand for these metals. In its half-year results for 2025, underlying EBITDA from copper soared 69%, from $1.8bn last year to $3.1bn. Aluminium also saw an increase by 50% to $2.4bn.

In fact, Copper has now grown from 14% of Rio Tinto’s underlying EBITDA in 2024 to 25% over this period.

With such massive investment expected in the AI infrastructure market, the miner has a tremendous opportunity to take a slice of the pie.

In effect, it could greatly benefit while the AI infrastructure is being built. AI firms that are looking to benefit directly from their use will have to wait until they’re actually built, so it’s definitely a chance for the company to make gains before others.

Things to consider

While the above sounds all well and good, investors should remember that there are risks in holding Rio Tinto shares.

Notably, commodity price fluctuations. For example, the average price of iron ore fell by 14% in the first half of 2025. This is the company’s largest source of earnings, and it contributed to the firm’s underlying EBITDA falling by 5% for the period. Investors need to bear this in mind.

However, on balance, I still believe the miner’s chance to take advantage of the growth in AI infrastructure is massive for its more directly exposed metals in this field, like copper. For this reason, I believe investors should consider buying its shares.

But this isn’t the only share in the space I think can benefit.

The post This cheap FTSE 100 stock could benefit from AI before anyone else appeared first on The Motley Fool UK.

More reading

• How much does an investor need in an ISA to target £1,500 in monthly passive income?
• £20,000 invested in the FTSE’s Rio Tinto a year ago is now worth…
• How much do I need in a Stocks and Shares ISA to reach a £2,027 monthly passive income?

Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.