My favourite FTSE income stock has just paid me £408.27. Here’s how I plan to turn that into a million

Harvey Jones is a happy investor today after receiving a bumper dividend from his favourite FTSE 100 income stock. Now he wants more.

| 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.

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.

Over the last year I’ve been adding one FTSE 100 income stock after another to my Self-Invested Personal Pension (SIPP). Today, I feel like I’m starting to reap the rewards.

Last spring, I decided it was a brilliant time to load up on dividend paying blue-chips. First, many were incredibly cheap as investors chased red-hot US tech stocks instead, but I felt the sell-off had gone too far.

Second, many offered ultra-high yields. I calculated that when interest rates peaked and bond yields and savings rates started to fall, their dividends would look even more attractive, in relative terms.

Should you invest £1,000 in British American Tobacco 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 British American Tobacco made the list?

See the 6 stocks

Chasing high dividends

With the FTSE 100 hitting all-time highs, the first of these assumptions appears to have come good. The second has been delayed, as we’re still awaiting that first interest rate cut. Yet it will come, most likely in June. More should follow.

Most of my high yielders are up nicely since I bought them, notably Lloyds Banking Group and Taylor Wimpey. There’s one exception though. Wealth manager M&G (LSE: MNG). Ironically, when I bought it, this was my favourite dividend stock of all, yielding more than 9%, as it still does today.

I invested £2k on 12 July, 8 September and again on 30 November. So that’s £6k in total. I received my first dividend in early November, an interim payment of 6.5p per share. This was based on a £4k holding (I hadn’t invested my final £2k then) and gave me £133.93. 

This morning I received my second. This was based on my full holding (including my reinvested dividend). The payout was also higher at 13.2p per share. My SIPP account is now £408.27 to the good. The cash will be automatically reinvested straight back into M&G.

This won’t make me a millionaire on its own, of course. But then it’s not the only dividend I’ll get this year. My Taylor Wimpey dividend hits my SIPP tomorrow. My Lloyds dividend lands on 21 May. Legal & General Group‘s is scheduled for 6 June. And on it goes throughout the year.

High and rising yield

Although dividends are never guaranteed, with luck mine will rise over time, for two reasons. First, most companies look to increase payouts annually, if cash flows are strong enough. Second, I’ll also get dividends on the shares I bought by reinvesting earlier dividends. These small, regular, reinvested payouts will roll up nicely over the years.

After a bright start, my M&G shares have sadly retreated. I’m up just 3.56%, before dividends. Over 12 months, the stock’s up just 0.84% (against 7.67% for the FTSE 100 as a whole).

Created with Highcharts 11.4.3M&g Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

That’s partly due to the ‘higher for longer’ interest rate outlook. M&G’s full-year profits, published on 21 March, jumped an impressive 28% to £797m, smashing expectations of £625m.

I feel markets have been harsh. Or perhaps I’ve bought into a value trap. Time will tell. Yet if the yield holds I’ll double my money in around seven years, even if the M&G share price doesn’t grow at all. I’ll treat any capital growth as a bonus.

Today marks another step towards retirement. A small one, yes. But investing is all about taking small steps, over a long, long time.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation 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.

Harvey Jones has positions in Legal & General Group Plc, Lloyds Banking Group Plc, M&g Plc, and Taylor Wimpey Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc and M&g Plc. 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

Investing Articles

These 4 FTSE shares have crashed hard. Which do I like today?

These four FTSE 100 stocks have plunged in value over the last month. But after this latest market meltdown, which…

Read more »

Investing Articles

1 FTSE 250 stock that analysts are calling a ‘Strong Buy’

The FTSE 250 can be overlooked by investors, but analysts believe this stock in particular could be undervalued by as…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

I asked ChatGPT to name 5 FTSE shares for the perfect SIPP. Here’s what it picked

Harvey Jones called on ChatGPT to help him decide which shares would be right to buy for a well-balanced SIPP.…

Read more »

Investing Articles

Should I load up on Rolls-Royce shares after the 17% drop?

Rolls-Royce shares have pulled back sharply in the FTSE 100 in recent weeks, leaving this Fool to wonder if he…

Read more »

Investing Articles

Is this the best S&P 500 stock to consider buying in these volatile times?

With bullion prices still rocketing, I think buying the S&P 500's only gold stock is worth serious consideration right now.

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Yielding 7.25% but with a P/E of 186x! What’s up with the BP share price?

Harvey Jones thought the BP share price was a brilliant bargain but it's only brought him a world of trouble.…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Down 26% with a 7% yield! Could this little-known FTSE 250 gem make a comeback?

Mark Hartley considers the long-term prospects of FTSE 250 recruiter Page Group. Weak results have sent the price tumbling but…

Read more »

Investing Articles

Analysts are calling Diageo shares a strong buy! Are they mad?

Analysts still have faith in Diageo shares, with 10 of them giving it the highest possible stock rating. Harvey Jones…

Read more »