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Investors have many ways to go about earning a second big income. But I believe that the best way to supplement my income with extra money is to buy FTSE 100 shares.
Broadly speaking, the stocks quoted by Footsie are usually:
• Be mature, market-leading businesses, whose steady flow leads to regular and reliable profits.
• Have operations in multiple regions, which in turn spreads risk across markets and provides consistent revenue and cash flow.
• They have strong balance sheets, which can help them pay decent and sustainable dividends even during economic downturns.
• Focus on offering large and growing returns to attract investors.
£4,440 passive income
As I say, this is a broad rule when it comes to investing in the FTSE 100. But dividend cuts are still possible which could affect investors’ income unexpectedly and cause share prices to fall.
This was the case with both National Grid again Vodafone in 2024.
But today there are still plenty of rock-solid income stocks to choose from. Legal & General (LSE:LGEN) is one of my favorites from the index.
If City’s predictions are correct, the company will provide me with an income of £4,440 between 2024 and 2026. That’s based on the £15,000 total I made at the start of the year.
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In my opinion, Legal & General has the best dividend track record in Footsie.
Profits have risen every year (except 2020) since the Great Financial Crisis. And the stock’s gains beat those of almost every other stock in the index during that time.
This is due to the strong business model of the company. Its presence in many areas and sub-sectors (such as insurance, asset management, and pensions) provides a healthy and reliable cash flow.
Such impressive dividend growth reflects the company’s sustainable financial strength. Today, its Solvency II ratio sits at 223% as of June, virtually unchanged from a year ago.
This gives Legal & General room to invest in profitable growth, while continuing to reward shareholders with large and growing dividends.
10%+ dividend yield
| A year | Predicted dividend per share | Return yield |
|---|---|---|
| 2024 | 21.32p | 9.6% |
| 2025 | 21.83p | 9.9% |
| 2026 | 22.36p | 10.1% |
As the table shows, City analysts expect profits to continue to rise over the next few years at least. I hope, too, that – despite the threat posed by intense competition in its markets – it will continue to grow in monetary rewards over time.
This will be supported by increased demand for wealth and retirement products as the population ages around the world.
I actually invested £15,000 in Legal & General shares in early 2024. So I expect those £4,440 worth of benefits to come my way over the next few years.
However, I have also bought a few other FTSE 100 stocks with strong track records of dividend growth and/or market-beating yields. These include Aviva, The Ashtead Group, Coca-Cola HBCagain Rio Tinto.
I hope that this diversified approach will help me generate more income than the index for years to come.
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