Here’s how £10k a year in high-yield financial stocks could get me a £2,800 a month income

I’m on the lookout for investments that could earn me some long-term income. And that means high-yield stocks.

Right now, I’m seeing some tasty FTSE 100 dividends. And the ones I most like are from financial stocks.

That’s right, I’m talking about today’s most hammered stock market sector. And at a time when our economic outlook appears dire.

Economic ills

The International Monetary Fund (IMF) reckons the UK economy is set to show the weakest growth in the G7 this year. And I’ve even seen claims that interest rates could stay around 5% for the next five years.

That might not be good for lending, for mortgages, or for banks. Well, higher interest means better lending margins. But that’s no good if nobody wants to borrow anything.

But what was it that famed investor Sir John Templeton said?

Buy when others are selling…

It takes patience, discipline and courage to follow the contrarian route to investment success. To buy when others are despondently selling, to sell when others are avidly buying

Sir John Templeton

Sir John was described by Money magazine as “the greatest stock picker of the century“. So maybe buying at what he called a time of maximum pessimism could help make me rich?

Which financial stocks?

How much might I be able to earn from half a £20k Stocks and Shares ISA allowance stashed in high-yield financial stocks?

I’m going to pick my top two banks, top two insurers, and an investment manager, and see how my income could build up from them.

So that’s Barclays, with a 4.9% dividend yield, and Lloyds Banking Group on 5.8%.

Then I’ll pick Aviva, with its 7.8% yield, and Legal & General at 8.8%.

And finally, let’s add asset manager M&G, on a whopping yield of 10.2%.

How much income?

Now these are all forecasts, so there are definitely no guarantees here. Dividends could rise and fall in the coming years, hopefully with an overall upward trend.

And share prices will almost certainly rise and fall. But, taking today’s figures as a snapshot, splitting £10k equally between these five stocks should get me an overall dividend yield of 7.5%.

Long-term returns

That’s not going to get me very much in year one. But I invest for the long term, with a 20-year horizon.

So if I can put the same £10k into the same shares, and buy new shares with my dividends, each year? Well, at 7.5% a year, in 20 years my pot could grow into a stunning £450k. And an annual 7.5% on that could earn me a very nice £2,800 a month in passive income.

Final thoughts…

Is this realistic? Well, if these dividends remained this high, I’d expect share prices to rise. That means I’d buy fewer new shares each year, and yields should drop.

And if the dividends are cut, I’d expect share prices to fall. So reality might not paint as pretty a picture as this.

I’d never put all my ISA money in one sector anyway, and would always want good diversification.

But I think this shows the potential long term value we could unlock by buying shares when they’re cheap and dividend yields are high.

The post Here’s how £10k a year in high-yield financial stocks could get me a £2,800 a month income appeared first on The Motley Fool UK.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report — 5 Shares for the Future of Energy — and discover:

Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
How to potentially get paid by the weather
Electric Vehicles’ secret backdoor opportunity
One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);

More reading

A super safe dividend stock that has been making payments for decades
If I’d put £10,000 in IAG shares 1 year ago, here’s what I’d have now
Would Hargreaves Lansdown meet Warren Buffett’s investment criteria?
2 high-quality FTSE 100 shares I’d buy hand over fist for reliable passive income
Why I’m convinced easyJet shares are ready to take off again

Alan Oscroft has positions in Aviva Plc and Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc, Lloyds Banking Group Plc, and M&g 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 post is shared from syndication feed, it is not edited by Analyzing Market Team.)