What’s the best way to build up some passive income for my old age? I go for UK dividend stocks. But would I buy BT Group (LSE: BT.A) shares as part of that strategy?
The BT share price has gained so far in 2023. But we’ve seen a lot of ups and downs over the years. And in five years, it shows a 35% loss.
It just might be a good pick now. But first, how much cash, and how many shares, would I need to earn my £100 per month?
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Forecast yield
City forecasts put the dividend yield at a bit under 5% for this year. So around 5% is fine for my ‘what if’ exercise. And it makes my sums easier.
My £100 per month is £1,200 per year. To get that with a return of 5% per year, I need to build up a pot of £24,000. And that’s about 15,000 BT shares.
Those who have the funds available to use up all their ISA contribution limit per year could snag those shares by next summer. But I’m not among them, and I’d have to put cash away each month for a while.
Regular savings
Let’s say I start with £100 per month now, save it in my Stocks and Shares ISA, and buy some shares when I build up enough.
It depends on how often I buy, when dividends are paid, and other timing things. But I work out that it would take about 14 years at that rate to build my pot of BT shares.
Now, £100 per month is not a lot. And if I can lift it to £200, I could reach my goal in a bit more than eight years. With £500 per month, I’d have my £24,000 in four years just from my savings alone.
I wouldn’t put all my cash into one stock like this, mind. Also, things will change over the years. So I can’t make any real predictions.
Part of a mix
But I think this shows the kind of result we could get from buying income stocks like BT.
I’d do it as part of a diverse mix, as I want to spread my cash to lessen my chance of a loss. So, would I make BT shares one of my picks for the long term?
Well, in the past, BT’s huge debt has put me off. Its earnings have been in a tough patch too. And the dividend was slashed all the way to zero in the Covid years.
But forecasts show steady earnings and dividends in the next few years. I think we’ll still need a bit longer to be sure though.
Risk ahead
There really is some risk here. BT has come back from the dead a few times in the past, only to sink again.
But if it can keep its cost savings going, keep working at its debt, and can keep the cash coming, I think it could be a good buy for passive income.
I’m warming to BT as part of my ISA mix, and it’s on my watchlist.
