2 FTSE 100 shares for a second income

In my search for ever-more second income, I now own 20 different FTSE 350 stocks. Here are two that I intend to hold tightly for the long run.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Group of young friends toasting each other with beers in a pub

Image source: Getty Images

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.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In my ongoing search for a higher second income, I keep turning to FTSE 100 stocks as a great source of passive earnings.

Share dividends as a second income

Right now, I have several sources of unearned income, including share dividends and cash interest. And when I finally retire, I will need to rely on my second incomes to survive. Thus, here are two shares that I own for their powerful income generation.

This income stock offers a 9% yield

My wife and I bought shares in Legal & General Group (LSE: LGEN) for our family portfolio in July 2022. We paid 246.7p a share for our stake in this leading insurer and asset manager.

Should you invest £1,000 in Glencore Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Glencore Plc made the list?

See the 6 stocks

As I write, the L&G share price stands at 218.46p, valuing the group at £13.1bn. This leaves us nursing a paper loss of around 11.5% on our purchase price.

Over one year, L&G shares have lost 2.4% of their value, plus they are down 11.5% over five years. However, we bought this stock to boost our second income, rather than for capital gains.

Also, this FTSE 100 share looks far too cheap to me today. It trades on a multiple of 5.6 times earnings, for an earnings yield of 17.9%. This means that the dividend yield of 9% a year is covered twice by earnings.

Then again, L&G manages around £1.3trn of assets for 10m customers, so it is heavily exposed to financial markets. If stocks and bonds plunge again (as they did in 2022), then the company’s earnings could take a big hit.

However, I see this outcome as already priced into the shares today. Hence, I’m happy to hold my L&G stock for its long-term potential.

Dividend stock #2: a 7.5% income

Glencore (LSE: GLEN) is another Footsie share we own for powerful passive income. This Swiss multinational is one of the world’s leading miners and commodity traders.

Thanks to a strong rebound since the crash of March 2020, Glencore is one of the FTSE 100’s biggest firms today. At the current share price of 464.35p, this business is valued at £57.3bn — a Footsie heavyweight.

Of course, Glencore works in the dirty world of digging up and selling natural resources. Hence, its shares are often shunned by environmental, social, and corporate governance (ESG) investors. However, the copper, cobalt, zinc, and nickel that it produces are essential for the transition to a low-carbon economy.

We bought this stock in August at a cost of 435.1p a share. So far, we have made a paper gain of 6.7%, but hope the best is yet to come. Meanwhile, the shares are down 5.8% over one year, but have leapt 48.3% over five.

Glencore’s price-to-earnings ratio of 7.5 translates into a healthy earnings yield of 13.4%. And for my second income, this share offers a market-beating dividend yield of 7.5% a year, covered 1.8 times by earnings.

That said, future dividends are not guaranteed — and Glencore cut its payouts in 2015, 2016, and 2020, when commodity prices fell back.

Finally, generating a growing second income from shares is a tricky business. That’s why our income portfolio includes 15 different FTSE 100 stocks, plus five FTSE 250 shares. Only by spreading our money around can we reduce our reliance on particular companies, sectors, and countries!

Should you buy Glencore Plc shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D’Arcy has an economic interest in Glencore and Legal & General Group shares. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »