Here’s how I’d invest £20k in high-yield dividend shares to target £500 in monthly passive income
The Motley Fool

By Paul Summers

I don’t have the time, energy or brain power to run a second business or invent something everyone wants. So, I think the stock market is my best option for generating passive income.

Here’s what I’d do with £20,000 at my disposal.

Getting organised
My first step would be to chuck the entire amount into a Stocks and Shares ISA. Conveniently, this amount is currently the maximum I can deposit into this kind of account per year.

But the main reason for housing my investments inside an ISA is that I won’t pay tax on any income I receive. I’ll come back to this in a bit.

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.

Buyer beware
I now need to think about which high-yield dividend stocks might be worth buying.

Spoiler alert: not all companies that return lots of cash to their owners are great buys!

At least some offer high yields because their share prices have tanked, perhaps because trading is bad. When this happens, the yield rises.

There are exceptions
Not every high-yielding stock is necessarily a disaster in waiting.

Housebuilder Taylor Wimpey (LSE: TW.) is one I’m more comfortable about. As thing stand, analysts have the company down to return 9.31p per share in FY24. Using the current share price, that gives a dividend yield of 6.4%, making it one of the biggest payers in the entire FTSE 100.

Is this all nailed on ? Sadly, no. A fresh economic headwind could see another dip in demand for housing. This would impact the Taylor’s bottom line and possibly its ability to pay dividends.

But I’m optimistic about this UK titan.

Firstly, its balance sheet is already in great shape.

Secondly, a cut to interest rates later this summer could be the catalyst for the next housing boom.

Third, there remains a huge shortage of quality housing in the UK. As a big player, this is surely positive for the company’s long-term outlook.

So, would I invest my full £20k in Taylor Wimpey? Absolutely not. Going ‘all in’ on any stock is asking for trouble, regardless of its quality.

Instead, I’d spread my cash around other shares to reduce risk. This is known as diversification and it might just save me from a world of (financial) pain.

To be clear, being diversified won’t stop my portfolio from losing value during a market correction or crash.

However, it should mean that my income stream isn’t massively disrupted if one or two stocks have to cancel their payouts.

Small steps
Investing in 10 or so companies for an average yield of 6.4% would only generate £1,280 per year in dividends. That’s nowhere near the £500 per month I’m looking for.

But this is where the secret investing sauce that is compounding comes in. By reinvesting the passive income I receive over time, I’m more likely to get to where I want to be.

Compounding at 6.4% annually for 25 years will generate just over £500 per month. I think that’s very achievable, especially if I’m shielding all of my gains from the taxman (remember him ?).

And the more money I can add on top of that initial £20k, the greater that passive income pile might become.

Remember this is no such thing as a safe dividend but just ‘safer’ dividends.

Trading update for the first quarter ended 30 June 2024

Assura plc (“Assura”), the specialist healthcare property investor and developer, today announces its Trading Update for the first quarter to 30 June 2024.  

Jonathan Murphy, CEO, said:

“Over the first three months of our financial year we have continued to deliver on our strategic objectives, and remain extremely well-placed to help support the NHS and wider healthcare market: we deliver an exceptional product, have a strong financial position, and have a culture that focuses on all of our stakeholders to ensure we build strong relationships for the long-term.

“At our results in May, we announced we had entered into a £250 million joint venture with USS, the largest private pension scheme in this country. This represents a significant and exciting step for Assura, providing further diversity of funding for future growth. It also allows us to recycle capital into our pipeline of opportunities across broader healthcare markets including with NHS Trusts, private hospitals, mental health and in Ireland. We continue to look at further emerging opportunities which could be funded through a variety of sources, including third party capital, whilst operating within our stated LTV policy range of 40-50%.

“The UK healthcare crisis is getting more severe by the year, which in turn is driving increased demand for healthcare infrastructure. The requirement for investment in this space has received cross-party political support, and we look forward to working with whichever party is in Government following today’s election.”

Continued track record of disciplined activity through first quarter

•      Portfolio of 612 properties with an annualised rent roll of £149.2 million (March 2024: £150.6 million)

•      Three developments completed with a total combined spend of £46 million; GP surgery in Shirley, ambulance hub at Bury St Edmunds and our largest in-house development project to date of the Northumbria Health & Care Academy at Cramlington

•      42 rent reviews settled in the quarter, covering £7.0 million of existing rent and generating an uplift of £0.5 million (7.8% uplift on previous passing rent)

•      Initial tranche of seven assets (valued at £107 million) agreed for transfer to joint venture with USS

•      Completed three asset enhancement capital projects (total spend £1.5 million) and four lease regears (existing rent £0.5 million); on site with a further five capital projects (total spend £2.9 million)

•      Quarterly dividend increased by 2.4% to 0.84 pence per share, as announced at the full year results, with effect from the July 2024 payment

Pipeline of opportunities for strategic expansion and further growth 

•      Currently on site with five developments; total cost of £46 million (March 2024: eight, £92 million) of which £32 million is remaining to be spent

•      Immediate development pipeline of five schemes (total cost of £28 million) (March 2024: five, £28 million).

•      Pipeline of 15 capital asset enhancement projects (projected spend £9 million) over the next two years

•      37 lease re-gears covering £4.5 million of existing rent roll in the current pipeline

Strong and sustainable financial position

•      Weighted average interest rate unchanged at 2.30% (March 2024: 2.30%); all drawn debt on fixed rate basis

•      Weighted average debt maturity of 5.8 years, no refinancing on drawn debt due until October 2025. Over 50% of drawn debt matures beyond 2030, with our longest maturity debt at our lowest rates

•      Net debt of £1,159 million (March 2024: £1,217 million) on a fully unsecured basis with cash and undrawn facilities of £293 million

DIVIDEND DECLARATION

   

Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust providing secure, inflation-linked, long income from grocery property, has today declared an interim dividend in respect of the period from 1 April 2024 to 30 June 2024 of 1.515 pence per ordinary share (the “Fourth Quarterly Dividend”).

The Fourth Quarterly Dividend will be paid on or around 16 August 2024 as a Property Income Distribution (“PID”) in respect of the Company’s tax-exempt property rental business to shareholders on the register as of 12 July 2024. The ex-dividend date will be 11 July 2024.

The Company has now declared four quarterly dividends totalling 6.06 pence per ordinary share in respect of the financial year ended 30 June 2024, in line with the Company’s full-year dividend target.

As the Company’s ordinary shares are currently trading at a discount to the published EPRA Net Tangible Assets per share, the board of directors of the Company (the “Board”) believes that it is not in the best interests of shareholders to offer the scrip dividend alternative, under which shareholders would have been able to elect to receive new ordinary shares in lieu of the cash dividend (the “Scrip Dividend Alternative”). The Board has therefore exercised its discretion to suspend the Scrip Dividend Alternative in respect of the Fourth Quarterly Dividend.

All shareholders who are entitled to receive the Fourth Quarterly Dividend will therefore receive it in cash.

The Board will keep under consideration the offer of a scrip dividend alternative in respect of future quarterly dividends

Daily Express

‘I’m a money expert – these five investments can outstrip property returns in the UK

By Jasmine Birtles

It is no secret that the cost of getting on the property ladder in the UK is currently at an exorbitant level. Recent research has shown that a third of millennials may never be able to own their own home and many others will continue to rent into their forties.

For decades, buying property has been viewed as the best way to build wealth and see a return on your investment. However, I don’t think that is the case.

Fluctuating house prices, high mortgage rates, and increasing upkeep costs mean that the return on property isn’t what it used to be. This is particularly the case for buy-to-let property investments which returned an average rental yield of five percent to eight percent last year.

If you’re currently struggling to afford to invest in property or looking for a more lucrative investment opportunity than buy-to-let, you’re in luck! Here, I will share five high-yield investments that could provide a higher return than property in the UK.
It turns out you don’t need to be a homeowner to grow your wealth.

ETFs
ETF stands for ‘Exchange Traded Fund’. In simple terms, ETFs are investment funds that are traded on stock exchanges, just like individual stocks.

ETFs are designed to track the performance of a specific index, such as the S&P 500 or Nasdaq. This means that when you invest in an ETF, you’re essentially buying a diversified group of assets that replicate the performance of the index it is tracking.

Annual returns on ETF investments vary from three percent up to 25 percent. Usually, ETFs on the lower end of this range come with lower risk.

By conducting careful research and identifying profitable opportunities, it is very possible to receive a higher return over one year than you would on a rental property.

Cryptocurrency
Cryptocurrency investing can be very volatile (of no interest for this blog)

REITs
REITs are the best gateway to property investing for people who can’t quite afford to put a down payment on a house!

REIT stands for ‘Real Estate Investment Trust. A REIT is a type of investment that allows everyday investors to invest in the real estate market without having to actually buy and manage properties themselves.

In simple terms, a REIT is similar to a mutual fund, but instead of investing in stocks and bonds, it invests in real estate assets.

One key feature of a REIT is that it must distribute at least 90 percent of its taxable income to its shareholders in the form of dividends. This means that investors in a REIT can earn a consistent income stream from rental payments and property sales.

But, can REITs outperform properties? It turns out they can. Data from Savills showed that, between 2010 and 2020, the average total return for a REIT in the UK was 7.2 percent. Whereas, the average total return for a residential property over the same time frame was 6.4 percent.

Some platforms allow you to invest in REITs from as little as £50, which makes them much more accessible than the property ladder!

Value stocks
For the last 50 years, the stock market has outperformed the property market. Therefore, stocks might be worth considering.

In particular, value stocks have the ability to provide generous returns to investors who manage to identify undervalued opportunities. Here’s how to find undervalued stocks.

A ‘value stock’ is a fancy term for a stock that is trading below its intrinsic value. Because of their undervalued price, these stocks have a lot of room for growth.

Value investing is a strategy that is most famously used by Warren Buffet – so if you get it right, it can be very profitable.

Start-ups
Investing in new businesses can be very rewarding, however, investing in start-ups can be risky! There is no guarantee that the business you invest in will succeed. (of no interest for this blog)

If you’re looking for alternative ways to build wealth that aren’t property, you should always keep diversification in mind (i.e. spread your bets!).

A diverse portfolio is a portfolio that consists of multiple different investments, rather than putting all of your eggs in one basket!

The ability to diversify is one of the main advantages of putting your money into an asset that isn’t property. Unlike hefty house deposits, many online brokerages offer low minimum deposits that allow you to spread your funds across multiple different assets.

Diversifying will reduce the impact of losses and increase your chances of investing in an asset that will generate returns.

I’ve bought for the portfolio 4790 shares in WHR for 4k, they go xd tomorrow for 1.6p and then I’ll either add to the position or flip it, if it posts a profit.

Cash for re-investment, earmarked for RGL £1,898.00

I’ve sold the blog portfolio shares in ADIG for a total profit of £509.00, when the 38p a share earned but not received is included.

The main reason is that the dividend will fall and rule

Number one is to buy shares that pay a dividend to buy more shares that pay a dividend.

 At the same time, I could look to add shares that could do well from increased Government spending in key areas such as property and healthcare.

see below – Dividends sanity, TR vanity

current share price 94.15p (buyers for the Trust today)

dividend 6.87p a yield of 7.3%

Trading just below its NTAV

One for DYOR

Here’s my prediction for the best FTSE 100 stocks for H2

Jon Smith details keys events that he’s watching out for in the coming six months and explains which FTSE 100 stocks he expects to do well.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

We’re in the second half of the year, with plenty on the horizon that could make for volatility in the stock market. It kicks off tomorrow (4 July) with the UK general election. In coming months, we’re due several major central bank meetings, inflation and other data releases that could impact FTSE 100 stocks. With that in mind, here’s how I think things could pan out.

Events ahead

If we start with the general election, I actually don’t think we see a huge market reaction if the Labour party win a majority. This is because this eventuality is widely expected by people. Investors don’t like unpredictability, but if things happen as expected, there’s not too much to be concerned about in the short term.

Looking ahead, I think that the main driver for the FTSE 100 will be inflation and the reaction of interest rates. The latest data showed that inflation is now back at 2%, the target level of the Bank of England. This should likely support several cuts in interest rates between now and the end of the year.

If my prediction is correct, I think that the best Footsie stocks for me to think about buying will be ones that stand to benefit from lower inflation and lower interest rates. At the same time, I could look to add shares that could do well from increased Government spending in key areas such as property and healthcare.

Next up

One example of a stock on my watchlist for H2 is Next (LSE:NXT). The fashion and homeware retailer has been a face on the high street for over four decades. Over the past year, the stock has outperformed, rallying by 32%.

I think the stock could continue to do well as inflation continues to moderate. Consumers should feel more confident with their finances without costs spiralling higher. This could see them spend more on clothing and home furnishings. I think Next is well positioned to benefit from this, in that it isn’t high-end luxury but more middle market.

Further, Next should benefit from lower debt costs. In the annual report, it mentioned how net debt reduced by £97m to £700m for 2023. This is great, but another benefit will be felt through lower financing costs going forward. If interest rates do fall, it’ll make issuing new debt less expensive. This ultimately should help to boost cash flow and profitability.

One risk is the problem that Next has with external factors. For example, in the latest quarterly report, it spoke of how demand might be lower due to wet spring weather. To be at the mercy of the natural elements isn’t something investors will be happy about!

Making a call

Ultimately, my predictions for the coming six months are based on how I see the world right now. People might (and do) disagree with me. Yet that’s the beauty of the stock market. It’s made up of buyers and sellers, with those that make the correct calls rewarded in the long run.