Here’s how investors can build a meaty second income starting from scratch.

Story by Charlie Keough

Young female business analyst looking at a graph chart while working from home© Provided by The Motley Fool

The main reason I invest is to build my second income. Further down the line when I’m thinking about retirement, I want to have a stream of income that I can rely on to help me enjoy life more. That’s the dream, isn’t it?

How to invest

Before I started to think about how much I wanted to invest, the first step I’d take would be to open a Stocks and Shares ISA. That’s because I wouldn’t be taxed on any profit I made. From the dividend shares I’d be buying, I’d also be able to keep all of the passive income I received from dividend payments.

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.

Starting out

So, I’ve decided I’m going to invest with my ISA. That’s the best way for me to set myself up for success. But what’s next? Well, now comes the most important part. It’s about getting started no matter how much money I have to invest.

But that’s far from the case. How we start doesn’t matter. What’s imperative is that we start as early as possible and over the long run  the stock market work its magic. I think £100 a week is a sensible starting amount.

Phoenix Group Holdings

Let me show an example of just how powerful this can be. The stock I’m going to use is Phoenix Group Holdings (LSE: PHNX).It’s an insurance company and a leader in the sector.

Its share price is down 1.8% so far this year. But a falling share price isn’t always a negative. For savvy investors, it means they can snap up bargains while the rest of the market overlooks it.

At its current share price, it has a dividend yield of 10.1%, way above the FTSE 100 average (3.6%). I like Phoenix Holdings because it has a strong balance sheet with plenty of cash spare as well as a rising dividend payout.

Money to be made

Taking my £100 a week and applying it to Phoenix Group’s 10.1% yield ought to see me make slightly over £525 a year in passive income. Not bad.

However, the longer I leave my money in the market, the better chance I have of building my wealth. If I adopt a 30-year investment time frame and reinvest all the dividend payments I receive, at the end of that I’d be making £10,168 a year in second income. I’d have a nest egg worth £106,269.

Investing always comes with risks and the stock market is volatile. There’s no guarantee that Phoenix Group’s yield will stay the same. It could rise or fall. Nevertheless, what this shows is that even investors starting from scratch are able to build a sizeable pot if they give it time.

The post Here’s how investors can build a meaty second income starting from scratch appeared first on The Motley Fool UK.

The 2025 fcast for the Snowball is income of £9,170 and a target of £10,000.

If the fcast is achieved that will be the plan’s fcast for the year ending 2027.

If the target is achieved that would equate to a future income stream in ten years of 20k pa. a yield of 20% on seed capital, if the dividends are re-invested at 7% or above.

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024

The Board of Triple Point Social Housing REIT plc (ticker: SOHO) is pleased to announce its unaudited results for the six months ended 30 June 2024.

Chris Phillips, Chair of Triple Point Social Housing REIT plc, commented:

“The Company’s portfolio has continued to demonstrate operational and financial resilience and the Group has benefited from strong rental growth that has increased income.

The Group will continue to benefit from having exclusively long term fixed priced debt and we look forward to building on the progress made in the first half of the year particularly in relation to the increase in rent collection and the corresponding increase in dividend cover, which ensured that the dividend was fully covered on an adjusted earnings basis for the six months ending 30 June 2024.”

Triple Point Social Housing REIT plc

(the “Company” or, together with its subsidiaries, the “Group“)

DIVIDEND DECLARATION

The Board of Directors of Triple Point Social Housing REIT plc (ticker: SOHO) has declared an interim dividend in respect of the period from 1 April 2024 to 30 June 2024 of 1.365 pence per Ordinary Share, payable on or around 4 October 2024 to holders of Ordinary Shares on the register on 20 September 2024. The ex-dividend date will be 19 September 2024.

The dividend will be paid as a Property Income Distribution (“PID”).

The Company is targeting an aggregate dividend of 5.46 pence per Ordinary Share for the financial year ending 31 December 2024. 

First graph showing dividends earned but not re-invested.

Second graph if the dividends were re-invested thru thick and thin, there will always be plenty of thin.

Note the yield on the FTSE100 is a variable 4%.

The snowball currently has £1,145 xd.

The next dividend payments aren’t until another 2 weeks.

The Snowball is still waiting for SOHO to declare their next dividend, after which the fcast and the target for 2025 can be announced.

GL

ANNOUNCEMENT OF NAV AND QUARTERLY DIVIDEND

Portfolio valuation increase and asset management initiatives underpin positive total return and fully covered dividend

Schroder European Real Estate Investment Trust plc, the company investing in European growth cities and regions, provides a business update and announces its unaudited quarterly dividend and net asset value (“NAV”) as at 30 June 2024.

–   Third quarterly interim dividend of 1.48 euro cps declared, fully covered by EPRA earnings, reflecting an annualised dividend yield of c.7.6% based on the current share price¹;

–   Underlying adjusted quarterly earnings from operational activities (“EPRA earnings”) of €2.0m (quarter ended 30 June 2023: €2.1 million)

–    Total interim dividends declared relating to the nine months of the current financial year of 4.44 euro cps, 106% covered by EPRA earnings;

–    The direct property portfolio was independently valued at €208.3 million², reflecting a marginal like-for-like increase over the quarter of 0.1% (31 March 2024: -1.0%), or €0.2 million, demonstrating valuation resilience and signalling improving sentiment as a result of falling interest rates;

–   Unaudited NAV of €164.0 million, or 122.6 euro cents per share (“cps”) as at 30 June 2024 (31 March 2024: €165.3 million, or 123.6 euro cps), driven primarily by a small property valuation increase, offset by capital expenditure and deferred taxes;

–     NAV total return of 0.4% for the quarter and -0.9% over the nine months of the current financial year;

–  The Company remains well positioned with a strong balance sheet, an available cash balance of approximately €26 million, and a loan to value ratio (“LTV”) of 25% net of cash and 33% gross of cash;

–    Two lease re-gears, totalling 2,242 sqm, completed at the Frankfurt grocery investment, securing long-term income from high profile tenants and increasing the unexpired lease term to break by over eight years:

o  a 1,641 sqm 15-year lease extension (from 2027 to 2042) with anchor tenant Lidl; and

o  an 8-year lease extension (from 2029 to 2037) with pet specialist, Fressnapf, for 601 sqm

Is renewable energy worth investing in ?

The net-zero transition using renewable energy is proving counterproductive for Britain. Is the sector still worth investing in?

(Image credit: Getty Images)

By Max King

last updated 10 September 2024

While the government seeks to accelerate Britain’s drive to “net zero” through the increased adoption of renewable energy, the private sector is going in the opposite direction. Since the middle of 2023, The Renewables Infrastructure Group (TRIG) has sold £210m of assets at an average premium to book value of 11%. 

Admittedly, most of these assets were in Ireland and Germany but it is notable that the proceeds are not being reinvested in the UK but used to reduce borrowings and initiate a £50m share buyback programme. With TRIG’s shares trading at a 21% discount to net asset value (NAV), this makes sense. 

Greencoat UK Wind, trading at a 9% discount, is also prioritising buybacks over investment. It launched a £100m buyback programme last autumn and expects to have £1bn of surplus cash flow in the next five years, based on its current power price forecasts. With borrowings of £2.3bn, it is likely to focus on debt reduction over buybacks.

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Foresight Solar, whose shares trade at a discount of 23%, is also buying back shares, though with borrowings equivalent to 65% of net assets, debt reduction is the priority. It has stopped making new investments and announced a disposal programme. Bluefield Solar, trading on a 19% discount, has also been selling assets to reduce debt and finance new projects.

With combined assets of more than £10bn, these are not small companies. The story in the rest of the sector is the same – shares trade at significant discounts to NAV, making the raising of new capital impossible. Share buybacks and the reduction of debt are a priority, as are asset sales to speed the strategy along.

Is the renewable energy push destined to fail?

No wonder the UK Offshore Wind auction last September failed, securing no bids at all – the previous government set an ambitious price cap of £44 per megawatt-hour (MWh). This was similar to the price set in the previous auction but, since then, inflation has increasedcosts significantly. Industry experts estimated a price of £60 per MWh would be necessary for any bid to be viable, and the government responded with an increase in the maximum price at the next auction to £73. 

That, though, is above the current wholesale price of electricity and takes no account of the cost of the intermittency of renewable generation. If the new government conducted an auction on this basis the cost of electricity would rise, yet the Labour Party is committed to “cutting household energy bills by up to £1,400 a year and saving businesses £53bn by 2030”. So where will “the clean and cheap power” it has promised come from? 

Not from onshore wind generation – the turbines are too small and onshore arrays lack the huge scale of offshore. The new National Wealth Fund and GB Energy, funded with borrowed money, are supposed to “unlock critical investment in key UK infrastructure” by “co-investing with the private sector in larger projects such as onshore wind and solar farms”. Presumably, the government is looking to the big pension funds for this investment but they are unlikely to find economies the listed funds can’t. And a liberal sprinkling of honours is unlikely to tempt them into investments with low returns.

Are the risks of renewables worth the reward?   

Even if the additional investment was forthcoming, whether from the private sector or the new public bodies, the result would be a glut of electricity when weather conditions were favourable – and hence very low prices – while shortages and very high prices would persist at other times. 

This would undermine existing providers of renewable energy, added to which the government’s wary tolerance of the private sector, while it is hoping for investment, could be replaced by hostility if, as is likely, investment is not forthcoming. 

On attractive discounts to NAV and with dividend yields above 7%, the investment funds specialising in renewables in the UK are superficially attractive, especially now they are focused on efficient operation, cash generation and enhancing shareholder value rather than expansion. Still, the political risks are significant, so investors should hold off.