I think investing for passive income is most useful when planning for retirement.
I can’t think of a better way to finish a life of successful investing than getting dividend payments straight into my pocket every month.
So here are the top British dividend shares I’d buy if I were retiring in 2024.
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Schroders
Schroders is an asset manager with institutional, retail, and asset management operations.
The investment looks compelling to me for passive income because of a 4.90% dividend yield, with 23 years of no reductions. Also, its 10-year dividend growth rate is 11.50%.
I think this company provides stability in terms of the share price, too. Since 1993, the shares have risen over 500%.
It’s worth noting, though, that in the last five years, the price has shifted up less than just 5%. I don’t think that’s great when considering the FTSE 100 has increased over 14% in the same time frame.
Although the dividend has been granted for 23 years, it could still be cut at any time, too.
United Utilities Group
United Utilities Group is the UK’s top regulated water and wastewater organisation, serving the northwest, including Liverpool and Manchester.
The company’s dividend yield is 4.40%, with 11 years of no reductions. Its 10-year dividend growth rate of 2.8% is pleasing to me.
The shares are up around 250% over all time, and in the past five years, they’ve risen almost 45%.
However, the company holds an immense amount of debt. It has £8.4bn in debt versus £340m in cash, as of 2023. This could seriously inhibit future growth and even lead to a dividend cut in the future.
Legal & General Group
Legal & General Group is a financial services company focusing on insurance, pension, investment, and mortgage products.
The company’s dividend yield is 7.90%, with 14 years of no reductions. It also has a 10-year dividend growth rate of 10.4%.
The shares have risen almost 1,000% over all time and over 7% in the last five years.
However, a potential downturn in the firm’s key markets could see the share price tumble and the dividend cut. I guess nothing’s a given in business.
How I’d invest
Earning £20k in yearly passive income from these shares isn’t easy. With dividend yields of 4.9%, 4.4% and 7.9%, that’s an average of 5.7%.
So, I’d need £350,877 to yield £20k a year in annual dividends.
However, that doesn’t account for tax or inflation, so I’d still be thankful to have a state and any other pension at retirement, too.
Ending in retirement with £350,877 is not an easy challenge. But, a life of successful investing shows it’s more than possible, in my opinion.
In fact, just £20,000 invested now over 30 years at a standard 10% yearly US market average return appreciates to £396,748. That’s due to the power of compounding.
Now, markets can fall, so that’s not guaranteed. But, I think patience and time can make a humble saver and investor like myself comfortable in my elder years.
