We have some exciting news to share! The Motley Fool UK has now become The Twelfth Magpie -- an independent, UK-owned company, led by our long-serving UK management team — Mark Rogers, Chris Nials and Heather Adlington. In practical terms, it’s the same team you know, now fully focused on serving our UK readers and members.

Just as importantly, our approach remains unchanged: long-term, jargon-free, and on your side. This site is our new home, and there will be extra tweaks made across the coming few days as we settle in. So if anything looks a little off, please bear with us!

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.

UK income stocks are a great way of aiming for a £317 monthly passive income

There are loads of UK income stocks to choose from at the moment. And now could be a good time to buy some to target a monthly three-figure passive income.

| More on:
UK financial background: share prices and stock graph overlaid on an image of the Union Jack

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Twelfth Magpie’s Premium Investing Services. Become a member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more, and get a free 'Best Buy Now' stock!.

British shares have established a reputation for being some of the best income stocks in the world. In fact, research by Fidelity has found that the dividend yield in this country is higher than in the US, Europe, and Asia.

And with so many exciting stocks to choose from, now could be a great time to start building a portfolio of high-yielding shares. Here’s one way of doing this.

Should you buy HSBC Holdings shares today?

Before you decide, please take a moment to review this report first. Despite ongoing uncertainties from US tariffs to global conflicts, Mark Rogers and his team believe many UK shares still trade at substantial discounts, offering savvy investors plenty of potential opportunities to learn about.

That’s why this could be an ideal time to secure this valuable research – Mark’s analysts have scoured the markets to reveal 5 of his favourite long-term ‘Buys’. Please, don’t make any big decisions before seeing them.

TerritoryDividend yield (%)Payout ratio (%)
UK3.447.2
Europe3.250.7
Asia Pacific (exc. Japan)2.539.8
Japan2.238.4
US1.427.5
Source: Fidelity

One approach

Personally, I’d use a Stocks and Shares ISA. That’s because any income and capital growth can be earned tax free. And although there’s an annual limit of £20,000 on how much can be invested, I don’t think this is likely to be a problem for the majority of investors.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Once an ISA’s been opened and cash transferred, it’s time to start picking some shares. Savvy investors know that it’s wise to have a number of stocks spread across different industries. Fortunately, many of the largest dividend payers on the UK stock market can be found in a variety of sectors.

And because dividends can never be guaranteed, I’d tend to focus on larger companies. Their global presence and, in most cases, strong balance sheets means there’s less chance of a dividend cut. And even if they did have to reduce their payout, it might only be a blip.

For example, the FTSE 100’s home to tobacco companies, banks, utilities, and construction companies, all of which have reputations for returning large sums of cash to their shareholders each year. And some of these have long track records of increasing their annual dividends.

The biggest of them all

In terms of cash, the biggest dividend payer on the London Stock Exchange is HSBC (LSE:HSBA). According to AJ Bell, it’s expected to pay out £9.2bn in its 2025 financial year. This doesn’t necessarily make it the highest yielder on the index – in fact, there are currently (5 February) 28 stocks offering a better return – but it shows how much free cash the banking giant can generate.

Of the five banks on the FTSE 100, HSBC’s yield (3.8%) is the highest. But it’s more of a mixed picture when other valuation measures are taken into account. For example, its price-to-book ratio is the highest and it ranks third when looking at price-to-earnings ratios. There’s little point buying an income stock if it’s obvious that it’s overpriced.

However, I don’t think it is. Don’t get me wrong, given that HSBC’s share price has risen 56% since February 2025, I’m not expecting this sort of growth to continue for much longer. But I can’t see it tanking either. And with its international exposure, diversified business model, healthy balance sheet, and strong brand, I think its dividend’s reasonably secure for now so is worth considering.    

HSBC’s just one example of a UK income stock paying an above-average dividend. Someone with a well-balanced Stocks and Shares ISA worth £100,000 — containing a number of dividend shares paying 3.8% — could generate monthly passive income of £317. What’s not to like about that?

HSBC Holdings is an advertising partner of Motley Fool Money. James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc, HSBC Holdings, and London Stock Exchange Group 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.

More on Investing Articles

Young Black woman looking concerned while in front of her laptop
Investing Articles

Have investors got BT shares all wrong?

BT shares spiked during the 1990s telecom boom, then struggled for two decades. Harvey Jones says it's the future that…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

Looking for buying opportunities in June? Here’s 1 to consider from my Stocks and Shares ISA

The conflict in Iran is making one of the investments in Stephen Wright’s Stocks and Shares ISA volatile. But could…

Read more »

Row of blue European Union flags in Brussels.
Investing Articles

After crashing 13.7% today, is Wise now a stock market bargain at 805p?

Wise was one of the biggest fallers on the UK stock market today. What on earth is going on with…

Read more »

Road 2025 to 2032 new year direction concept
Investing Articles

At 8% is this eye-popping FTSE 100 dividend yield simply too good to be true?

The dividend yield is to die for, but the share price is lacking in life. Harvey Jones examines whether this…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

UK investors are piling into this legendary S&P 500 growth stock while it’s down 50%

This US growth stock fell from $240 to $80 amid AI disruption fears. And investors are now aggressively buying it…

Read more »

Abstract 3d arrows with rocket
Investing Articles

£19,469 invested in BAE Systems shares 6 months ago is now worth…

BAE Systems shares have been charging higher of late. Is now the time to consider buying or is this top…

Read more »

Finger clicking a button marked 'Buy' on a keyboard
Growth Shares

Analysts think this growth share could rally a further 26% in the next year

Jon Smith talks through a growth share that's up 20% in the past month and could keep going based on…

Read more »

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing Articles

Are we staring at a once-in-a-decade chance to buy cheap FTSE 100 shares like this one?

Harvey Jones is on the hunt for cheap shares and cannot believe some of the bargains available today. One UK…

Read more »