One day, I want to take a nice passive income from my shares. And for that I need dividends.
I want a good dividend yield. And I want the cash flow that can support it year after year. And if I can buy when a stock is cheap, that’s great. That way, I can lock in even better long-term yields.
Today I’m looking at Barclays (LSE: BARC) shares, and how I could snag £100 per month from them.
Volatile
The Barclays price dipped in 2023, along with other bank shares, due to fresh sector fears. However, I doubt we’ll have a new crisis, and I think it’s just a short-term scare.
But it does show something important. Bank shares, and dividends, have been up and down over the past 10 years. And that’s not good for steady income.
But, I’ll only want steady cash for when I retire. Until then, as long as I can get good average yields, that’s all I want.
Target
So what would it take for me to pocket my £100 per month, then? That’s £1,200 per year. And right now, Barclays shares are on a dividend yield of very close to 5%.
To take home £1,200 per year at that rate, I’d need a pot of £24,000. And at today’s price, that would buy me 16,000 shares.
I don’t have £24,000 to spare right now. So what if I start today and set aside £100 per month to buy Barclays shares?
Well, if the 5% dividend stayed the same each year, I could reach my target in 14 years. It would depend on the timing of my dividends, and on how long it would take me to build up each investing amount.
Better?
But it’s in that ball park. And a target like that has got to be in reach for a lot of investors. Oh, and it doesn’t include any share price gains we might enjoy too in the next decade and more.
Now, if I could stretch to £200 per month, I could get there in just around eight years. I know times are hard and we all feel the pinch these days. High interest rates mean a lot of us have a lot less cash in our pockets right now.
But I think that makes it even more important to set aside what we can to help fund our old age. And, I don’t think £200 per month is a lot out of a modern life style.
Risk
Now, I must stress that this is not a prediction here. No, it’s just a bit of ‘What if?’ In reality, dividend yields don’t stay the same.
Barclays faces bank sector risk, too. And I would not put all my cash in one stock. Instead, I’d diversify across different sectors. I’d say diversification is the best way to help reduce the risk of share price losses.
So, I won’t put my cash all in Barclays. But it is on my buy list as I plan my long-term passive income investments.
