Many people are under the illusion that building-wealth in the stock market is solely for the most wealthy in society. But that couldn’t be further from the truth. And even with just £150 a month, a 40-year-old investor can go on to build a pretty chunky £952,435 nest egg for retirement. Here’s how.

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.

Compounding to six-figures

The stock market can be a volatile place. But over the long run, even with this volatility, index investors have earned an average of around 8% a year.

Let’s assume this historically pattern will continue moving forward. And that a 40-year-old, who’s only just started investing, is drip feeding £150 each month into the stock market with plans to retire at age 68.

How much money could they have 28 years from now?

The answer is around £187,285 – about 30% more than the average £145,900 most 64-75-year-olds have in Britain today. That’s pretty nice, but investors can do even better.

Aiming higher

Instead of relying on passive index funds, investors can take matters into their own hands and craft a custom portfolio. Why? Because while this requires more effort, it also opens the door to drastically-improved results.

Fun fact, £150 a month invested at 12% instead of 8% is enough to build a £409,691 ISA. And following the 4% withdrawal rule, that’s enough to generate an extra tax-free retirement income stream of £16,388.

Of course, now the question becomes, which UK shares can deliver such market-beating returns?

Market-beating potential

Looking at the last 20 years, there have been some big winners in the UK stock market, including Hill & Smith (LSE:HILS).

The infrastructure engineering group has generated close to a 16% annualised total return over the last 20 years alone (enough to grow an ISA to £952,435!). And while other big winners such as Goodwin and 4imprint Group operate in different industries, their stories have a lot of similarities.

Each winner capitalised on structural demand in resilient market niches to generate consistent, reliable cash flows protected by a moat of competitive advantages. And even in 2026, Hill & Smith continues to use the same strategy.

Government-backed US infrastructure spending is creating fresh opportunities for the business to grow, while road safety initiatives are doing the same across the UK and Europe. Pairing this with cash flow consistency alongside steady growth, management’s able to prudently allocate capital to target long-term, market-beating gains.

Of course, Hill & Smith’s still exposed to the cyclical nature of infrastructure and construction cycles. Project delays or government budget cuts can have a nasty impact on performance – something the business has recently been tackling in both the UK and India.

Nevertheless, with such a stellar track record, it’s a risk investors may want to consider taking. Obviously, that doesn’t guarantee the stock will continue delivering 16% annualised gains moving forward, especially since its market-cap now stands at £1.8bn. But there’s still plenty to get excited about, in my opinion.

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Fortunately, British investors can leverage the power of a Stocks and Shares ISA to not only build wealth, but also aim to generate a passive income that beats the State Pension, entirely tax-free.

Here’s how.

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.

The retirement income plan

Let’s set a retirement goal of reaching the £31,700 total income threshold. That means £12,547.60 will come from the State Pension and the remaining £19,152.40 from an ISA portfolio. How large does this portfolio have to be?

Following the 4% withdrawal rule, the answer is around £478,810.

Needless to say, that’s a pretty substantial nest egg. And it’s roughly 3.3 times more than what the average 65-year-old has saved for retirement in Britain. However, by starting early and investing a £500 lump sum each month, surpassing the half-a-million-pound threshold is actually very doable.

The stock market, on average over the long term, generates a total return of 8% a year. By investing £500 a month at this rate, an ISA portfolio will surpass £478,810 within just over 25 years. So if someone has just turned 40 and is starting from scratch, there’s still plenty of time to prepare for retirement.

£500,000 may not be enough

The UK State Pension is expected to rise steadily over time. The only trouble is, so does inflation. Therefore, while a £31,700 retirement income may be enough in 2026, that’s not likely to be the case in 2050.

This is where stock picking offers a potential solution. Instead of generating an 8% return with index funds, investors can aim higher by investing directly into the best and brightest businesses. And when executed successfully, the results can be game-changing.

Hill & Smith (LSE:HILS) is a perfect example to consider. Over the last 25 years, the infrastructure and galvanising specialist has generated a staggering 6,717% total return through superb operational execution, value-adding bolt-on acquisitions, and international expansion.

That’s the equivalent of an 18.4% annualised return. And anyone who has been drip feeding £500 a month since January 2001 now has a staggering £3.1m – enough to generate a £124,006 tax-free passive income!

Still worth considering?

After almost three decades of growth, Hill & Smith’s now a £1.8bn enterprise. At this size, it’s unlikely to maintain its impressive historical pace. But that doesn’t mean there isn’t more room for further expansion.

In 2026, numerous structural tailwinds remain intact. The US is accelerating its national infrastructure spending to repair existing services and support the rise of AI. Meanwhile, its operations across the UK and India are also seeing a steady uptick in activity as cost-saving efforts pave the way for wider margins.

There are, of course, risks. Macroeconomic uncertainty has and could further delay infrastructure projects, especially if recessions start to emerge or AI spending slows demand for new data centres.

Nevertheless, given the mission-critical nature of infrastructure and Hill & Smith’s role in building it, the firm could be worth a closer inspection for investors seeking to build long-term retirement wealth.

The post How much do you need in an ISA for a passive income that beats the State Pension? appeared first on The Motley Fool UK.

Obviously, that’s something every investor wants to avoid. So which income stocks are worth considering today for long-term passive income potential?

Well, one potential candidate I’ve got my eye on right now is Hill & Smith (LSE:HILS). Here’s why.

A new £120bn growth opportunity

Last month, the government unveiled its Autumn Budget. And while not everyone’s happy with the incoming tax hikes, there are nonetheless a lot of businesses set to benefit from new tailwinds. And one sector that investors are seemingly overlooking is infrastructure.

Specifically, £120bn of spending has been earmarked for investment into improving Britain’s roads, rail, energy, and housing. And as a leading supplier of steel and road safety equipment, Hill & Smith seems perfectly positioned to capitalise on this new spending policy.

Even before the Budget, Hill & Smith has already been capitalising on higher infrastructure spending across the pond.

With over a trillion dollars actively being invested by the US government, the company hasn’t exactly struggled to find demand for its infrastructure products and services. So much so that management’s been able to exercise impressive pricing power, leading to expanding profit margins.

The result? Revenue growth over the last five years has averaged around 7% while earnings have compounded at an even faster 22%. And that’s directly translated into its dividend per share climbing from 10.6p at the start of 2020 to 50.5p today – a 376% increase in just five years!

So even though Hill & Smith shares offer a 2.2% dividend yield right now, investors could see this yield rise significantly if the company maintains or even accelerates its current pace.

What to watch

Hill & Smith’s US operations are almost entirely self-contained. That’s proven to be a handy advantage against many of its peers since tariffs entered the picture. And its subsequent success in America is a big reason why Hill & Smith’s financials have vastly outperformed in the last five years.

However, looking at its UK operations, the story’s quite different. Prior to the Budget, UK infrastructure spending has actually been quite weak, particularly when it comes to roads. The dire state of public finances, including at the local council level, has hampered demand for its road safety solutions, which drive most of its UK cash flows.

The £120bn UK spending plan obviously addresses this issue. But with public finances still not in great shape, there’s no guarantee the government will actually deliver on this promise. And the government’s recent track record hasn’t been terrific either, following the delay of the Road Investment Strategy 3 report.

Nevertheless, Hill & Smith has demonstrated a knack for operating through cyclical downturns throughout its 200-year history. That’s why, despite the short-term risks, this income stock’s worth a closer look. And it’s not the only dividend-growth opportunity I’ve got my eye on right now.

The post One of my top passive income stocks to consider for 2026 is… appeared first on The Motley Fool UK.

However, after a stunning 1,177% return in just under three years, this growth looks like it’s already fully realised in Nvidia’s share price. Yet the same isn’t true for other AI-related stocks.

In fact, while most investors are being distracted by semiconductor manufacturers and software developers, there’s an entire underlying value chain currently being largely ignored. And Hill & Smith (LSE:HILS) sits at the heart of it.

A hidden AI player

Hill & Smith owns and manages a portfolio of 17 businesses, each specialising in their own unique niche. However, they all exist to serve one sector – infrastructure.

Despite being listed in London, this business actually makes the bulk of its money in the US. And with America investing trillions into repairing and expanding its national infrastructure, management has had little trouble finding high-margin growth opportunities.

In fact, in the last five years, the group’s underlying profits have more than doubled. And this momentum has only continued since 2023, with private companies drastically ramping up investments into building data centres.

Combining this with adjacent verticals like electricity generation & distribution, renewables, electric vehicle recharging stations, and logistic centre build-outs, among others, Hill & Smith’s excess cash flows keep expanding.

Yet despite this operational momentum, the stock still trades for a modest forward price-to-earnings ratio of 15. With that in mind, it’s no surprise that management recently launched a £100m stock buyback programme to take advantage of its cheap valuation.

What’s the catch?

Despite the ongoing strength of this business, it nonetheless has plenty of risks to navigate around. With a strong dependence on public and private sector infrastructure, Hill & Smith is ultimately exposed to long spending cycles.

Right now, that’s working to the firm’s advantage for its US-based operations, as the government is investing quite aggressively. But in the UK, it’s quite the opposite.

The dire state of public finances means that a lot of infrastructure investment, particularly in British roads, is being postponed. So much so that the group’s UK revenues are actually shrinking.

At the same time, apart from data centres and logistics hubs, the private sector isn’t spending much on infrastructure either. Higher interest rates have resulted in many construction projects being delayed or even outright cancelled.

Overall, that means most of Hill & Smith’s current progress is being driven by US government infrastructure spending. And if that were to suddenly slow down due to shifting political priorities, this tailwind could quickly turn into a headwind for the business.

Nevertheless, despite this risk factor, the group’s balance sheet appears to be in tip-top shape with negligible leverage, giving management plenty of financial flexibility to weather a potential storm.

Top this off with a cheap share price, and Hill & Smith looks like an under-the-radar investment opportunity in my eyes. That’s why I think investors may want to consider investigating it further. Yet it’s not the only hidden opportunity I’ve spotted this week.

The post Forget Nvidia! Here’s a cheap stock secretly profiting from the AI boom appeared first on The Motley Fool UK.

Still, there are a few outliers on the secondary index — and when it comes to growth, their smaller market-caps work in their favour. Of course, it’s too soon to assess where the US economy will go under Trump. But if it booms, I think investors should consider these two stocks for their growth potential.

4imprint Group 

4imprint Group (LSE: FOUR) markets promotional merchandise like branded stationary, USB drives and apparel. Despite being based in London, the 40-year-old company derives 97% of its revenue from the US. Some of its stand-out featured brands include US giants Nike, Camelbak and Sharpie.

However, its drop ship distribution model faces risks from third-party service disruption. This can be costly and cause reputational damage. Still, the company has enjoyed spectacular success in the past 10 years, with the stock growing at an annualised rate of 21.4% a year. 

In its latest trading update, it expects pre-tax profits of $153m for the 2024 full-year, exceeding expectations. Released earlier this week (21 January), the update also outlines revenue expectations up 3% and a 5% rise in existing customer orders. The shares jumped 12% on the news.

Despite the rapid growth, it’s still trading at 32% below fair value based on future cash flow estimates. Reinforcing that estimate, the average 12-month analyst forecast eyes a price 30% above current levels.

Hill & Smith

Highways construction firm Hill & Smith (LSE: HILS) provides engineering solutions and galvanising services in the US. Following the country’s introduction of a $1.8trn infrastructure bill in 2022, Hill and Smith’s products have enjoyed surging demand.

The stock price has shot up by over 100% since. Consequently, it has a slightly higher-than-average price-to-earnings (P/E) ratio of 20. Still, I think there’s more room for growth.

While the company suffered from surging debt before Covid, this has been decreasing although it still outweighs cash flow. That leaves a risk of defaulting if profits slip and it struggles to cover interest payments.

Recently-appointed CEO Rutger Helbing believes the company “has excellent prospects for further value creation” and there’s “strong demand for our products and services, particularly in the US.“

On 5 January, it paid a dividend of 16.5p per share to shareholders, up 15% from the previous period. This follows a 20% increase in revenue and a 39% rise in earnings. The yield now stands at 2.9%.

It could go either way!

While a booming US economy could help both these stocks, there’s a chance Trump’s tariffs send things the other way. That’s a key risk, besides the usual ones of foreign exchange fluctuations and regulatory changes. 

Taking into account the current valuations, I think the rewards here could outweigh the risks. In the coming years, both these stocks could climb much higher than today so I think they’re both worth considering right now.

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Being a mature adult with no savings isn’t a position that any of us want to be in. Yet it’s a reality for some, even at 40, through no fault of their own. If I was in that position right now and wanted to start to build wealth for retirement, I have a couple of FTSE 250 stocks that would be on my radar to consider buying.

To allow me to have the funds to purchase the stocks, I’d first look to cut back on my spending or boost my income. This would leave me with excess funds at the end of each month that I can use to invest.

Doing the simple things well

First up is Hill & Smith (LSE:HILS). It might not be the superstar tech stock that’s in the news all the time, but I like it for different reasons.

The business designs, manufactures and supplies products for the construction and infrastructure industries. The firm is focused mainly on operations in the UK, USA, India and Australia.

I like the stock as one to hold through to retirement as it operates in a sector that should have perpetual demand. What I mean by this is that there’s a constant need for everything from road safety barriers to steel chains. Therefore, the products that the firm sells will always be needed in the future for basic functions. This should mean that it can continue to be profitable (and have a healthy share price) for a long time.

Further, it appeals to me due to its long-term share price growth. A decade ago the stock was trading around 500p. It’s now at 1,850p. Yet the share price isn’t showing signs of slowing down. Over the past year, the stock is up 36%.

A risk is that the firm needs to manage acquisitions carefully. It has snapped up three businesses within the past year. They need to be integrated carefully to ensure that spending isn’t wasted and overly time-consuming.

Across the pond

Next I like the JP Morgan American Investment Trust (LSE:JAM). The recent outperformance of the US stock market has attracted a lot of attention from this side of the pond.

The trust is a nice way to get exposure to US stocks without me having to be an expert. Further, I feel it’s a bit generic to simply buy the major US tech firms. To generate real outperformance relative to the index, I need to have exposure to other companies.

This is what the trust does. Although it still owns major firms like Nvidia and Apple, some of the top holdings also include Loews Corp and Regeneron Pharmaceuticals.

When I’m thinking about stocks to hold to retirement, the trust is an easy way to have some exposure to the US without me having to work too hard in researching individual names.

Over the past year, the stock is up 33%. A definite risk is that the US market could be starting to become a bubble. If we see a sharp correction lower over the next year, I could be kicking myself for buying when I did.

The post With no savings at 40, I’d buy and hold these 2 FTSE 250 stocks to retirement appeared first on The Motley Fool UK.

But in the last 12 months, things seem to be turning around, with the company’s market cap surging by 61% to the point where it’s almost in line with its 2021 peak levels. What’s going on? And can this upward trajectory continue to climb even higher?

Record numbers, record performance

As a quick reminder, Hill & Smith provides a range of infrastructure services to the UK and US construction sector as well as rail and energy generation industries. But it’s in America where the company seems to be stealing the show.

With the US government ramping up its spending into renovating its ageing electrical grid infrastructure, Hill & Smith has had no trouble finding work. As such, its Engineered Solutions division saw sales grow by an impressive 33%, with operating profits more than doubling on the back of expanding profit margins.

Similarly, with demand for rust-proof steel rising, its Galvanizing Services segment also achieved double-digit growth. And while underlying earnings only grew by a modest 6%, that was still sufficient to achieve a new record high.

Overall, Hill & Smith’s top line over the first six months of 2023 expanded by 20%. And with underlying operating margins growing from 12.5% to 14.9%, earnings grew at a much faster pace of 43%. Considering the current economic climate, this level of growth, especially for an industrial business, is an impressive sight.

The UK hasn’t fared as well

Considering the rampant growth across the pond, it’s not surprising to see shares bounce back from last year’s correction. However, operations here at home haven’t managed to keep up.

Looking back at the Engineered Solutions segment, UK sales actually shrunk as general spending in the construction sector ground to a halt. Management was able to offset some of this volume decay through higher pricing, but it still resulted in a 4% shrink in sales.

Meanwhile, a further 19% reduction in volumes from British customers was reported in its Galvanizing Services. And a similar story seems to be present for all of the group’s other divisions as well. And management expects these challenges to continue throughout the rest of this year, possibly bleeding over into 2024.

Can the stock continue to climb?

With around 45% of sales stemming from the UK, the slowdown in British infrastructure and industrial spending is having a significant impact on Hill & Smith’s performance. Yet, all of these problems are currently being offset by the strong growth in the US.

So, can the firm continue to expand internationally until market conditions improve at home? In my opinion, yes.

Apart from investing in the national energy grid, the US government has recently passed multiple infrastructure investment bills into law. As such, finding new projects and opportunities shouldn’t be challenging for this enterprise. And with a forward price-to-earnings (P/E) ratio of 16.3 – in line with its five-year average – this growth opportunity looks fairly priced in my eyes.

The post Up by 61%! Can this FTSE 250 stock make me richer? appeared first on The Motley Fool UK.

Look a little deeper, however, and some market participants have a lot to smile about.

Domino’s Pizza

Domino’s Pizza (LSE: DOM) shares have climbed 15% in the last month. Go back a full 12 months and the price is now 67% higher!

The most recent surge is down to the company reporting higher orders and sales over the first six months of 2023. Guidance on full-year underlying core profit was also raised to between £132m and £138m. An announcement that Domino’s would be spending £70m in buying back its own stock compounded investors’ joy.

Obviously, the ongoing cost-of-living crisis remains a headwind. A forecast price-to-earnings (P/E) ratio of 22 also means the shares are no longer cheap and way above the five-year average of 14. That suggests the price might be up to date with events.

Still, I’ve always liked Domino’s for the high margins and returns on capital employed it consistently posts. So, I’m keeping it on my watchlist in case we get a more general sell-off and I can pick them up at a lower price.

4imprint

Promotional product provider 4imprint (LSE: FOUR) also performed admirably in August.

Annoyingly, I only looked at the stock at the end of July and liked what I saw. Had I invested, I’d be looking at a gain of 14% in the first month of ownership.

Again, here we have a business that’s doing very well. Profit before tax soared 50% to $66m in the 26 weeks to the start of July, pushing management to lift the interim dividend by 54%!

One fly in the ointment I was wary of previously was the valuation. Today, this stands at a P/E of almost 24. That’s even higher than its fast-food FTSE 250 peer.

Now, if 4imprint can continue growing at a fair clip then buying now can still be justified. However, the risk of a big fall if it even slightly misses targets is arguably rising.

As such, I’m increasingly viewing this as a stock to pile into during a market meltdown.

Hill & Smith

A third stock that seems to be on a great run of form is infrastructure specialist Hill & Smith (LSE: HILS). In the last year, the shares have rocketed 72%. A 13% rise was delivered in August alone.

A quick look at the recent, record half-year results explains why. At £57.2m, underlying pre-tax profit was 42% higher than over the same period in the previous year. Trading in the US was particularly strong.

In fact, things are going so well that management believes the full-year outlook is now “modestly ahead” of previous market expectations.

Once again, the momentum over the last month has impacted the valuation. The stock now trades on a P/E of 18 — quite dear for a company in this sector. On the flip side, it is in line with Hill & Smith’s average valuation over five years. So, perhaps the share price stands a better chance of moving higher than the other two?

Even if it didn’t, a secure-looking 2.2% dividend yield might provide some comfort.

The post These UK stocks jumped in August. Is there more to come? appeared first on The Motley Fool UK.

With that in mind, I believe Hill & Smith (LSE:HILS) could be a great passive income stock for my holdings. Here’s why.

Roads and infrastructure

As a quick introduction, Hill & Smith is a supplier of infrastructure products such as road safety barriers, plastic drainage pipes, zinc coating for steel structures, and bridges. It is best known for building the crash barriers found on roads but also offers other road safety products such as lighting.

So what’s happening with Hill shares currently? Well, as I write, they’re trading for 1,214p. At this time last year, the stock was trading for 1,757p, which is a 30% drop over a 12-month period. I believe the shares have dropped due to macroeconomic headwinds coupled with the geopolitical events in Ukraine.

A passive income stock with risks

As with any dividend stock, dividends are never guaranteed and can be cancelled at the discretion of the business to conserve cash. A prime example of this is when the pandemic struck.

In relation to Hill itself, macroeconomic headwinds could hamper progress and returns. Soaring inflation, the rising cost of materials, and the supply chain crisis, could hurt performance and returns. Rising costs can place pressure on profit margins which underpin dividends. Furthermore, in times of economic uncertainty, infrastructure spending can be curtailed. I do view this final issue as a short-term risk, however.

Why I like Hill & Smith shares

Let’s take a look at the positives then. Firstly, I believe Hill & Smith shares have some defensive capabilities. This is because roads are essential in the modern world and safety barriers are a key part of this. Hill has an excellent profile and provides its products throughout the developed world. This should boost performance and any passive income I hope to make.

Next, infrastructure spending in the world is only increasing in the longer term. This includes the number of roads and buildings, both domestic and commercial, to cope with an increasing global population. This increase in spending should boost Hill & Smith’s future performance.

Next, at current levels, Hill shares offer a modest dividend yield of 3%. This is higher than the FTSE 250 average of just under 2%, however. A key part of my investment strategy is to focus on the long term. I would expect this rate of return to continue growing based on Hill’s defensive abilities as well as increased infrastructure spending worldwide.

Finally, I can see that Hill has a consistent track record of performance. I am aware that past performance is not a guarantee of the future, however. Looking back, it has recorded consistent revenue for the past four years and profit growth in the past two years. In fact, 2021 was its highest performance recorded based on revenue.

In conclusion, I believe Hill & Smith is an excellent passive income stock that could boost my holdings now and for the foreseeable future. I would add the shares to my portfolio.

The post I’d buy this FTSE stock to boost my passive income stream for years to come! appeared first on The Motley Fool UK.

Road warrior

I reckon that Hill and Smith’s (LSE: HILS) a UK share that could deliver big returns over the next 10 years. This business is most famous for building the crash barriers that can be found alongside roads. But it offers an array of other roadside furniture like signs, lighting apparatus and bridges too.

Its operations can be found all over the globe, from Australia and Sweden to the UK and the US. In my opinion, it can expect demand for its products to rise as huge infrastructure-building projects come on stream in the years ahead.

Yet a risk to Hill & Smith’s profits outlook in the UK has just emerged. The government plans to launch a £27bn road-building programme, a move that should provide a meaty revenues boost for the UK share. But a legal challenge on environmental grounds threatens to scupper the construction project. I still think the firm is an attractive buy though, even with that UK issue.

Profits projections can fall short if trading conditions change. But City analysts think Hill & Smith’s earnings will rise 31% in 2021. This leaves it trading on a forward price-to-earnings (P/E) ratio of 20 times.

A green US share

I believe that buying Blink Charging (NASDAQ: BLNK) is another good investment idea for the 2020s.

This US share builds and operates charging stations from which drivers can juice up their vehicles at home, at work or on the street. This puts it in pole position to ride the EV revolution in my opinion.

Despite the broader slowdown in the new car market last year, sales of these cars rose 4% in Blink Charging’s home territory of the US in 2020. Demand for low-carbon vehicles is likely to keep growing too, as legislators are increasingly laying down ambitious targets for EV adoption, and car manufacturers accelerate development in this particular field.

That said, I think there is a serious threat to Blink Charging’s long-term earnings outlook. Plug-in EV sales are soaring today, sure, but hydrogen vehicles may eventually prove to be the winner. They’re quicker to fill up and their fuel cells offer better range than the majority of electric batteries. New hydrogen fuelling stations are also being built all over the world. And the world’s largest carmakers are also investing huge sums into this form of green mobility too. Hyundai, for example, has just announced plans to build a vast hydrogen cell manufacturing plant in China.

Despite this risk, I still feel that Blink Charging could deliver big returns for UK share investors over the next decade. This is even though City analysts expect the company to remain loss-making this year. And especially as the company aggressively builds out its charging station network through a mix of organic investment and acquisition activity.

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