Even with only £150 to spare each month, a committed and disciplined investor can go on to unlock a £7,660 passive income. Even more so when zooming in on the London Stock Exchange, which is home to some of the most generous dividend-paying companies in the world.
So how do you transform a monthly £150 investment into a nine grand income stream? Let’s break it down.
Crunching the numbers
Right now, I can start drip feeding money into a low-cost FTSE 100 index tracker. This move automatically diversifies my portfolio. And it allows me to match the performance of the wider stock market which, historically, has generated an average of 8% a year.
Assuming that trend continues over the next 20 years, then my £150 monthly investment is eventually transformed into £88,353.06 — £52,353.06 of which is pure profit!
Having a near-£90k nest egg is certainly quite a lovely prospect. But how do I then turn this into a passive income stream? The answer is dividends.
Overall, the UK’s flagship index currently offers a payout of 3.05% — less than what some high-interest savings accounts are offering right now. But when zooming in on some individual income stocks, the payout can be dramatically more substantial.
For example, Legal & General (LSE:LGEN) shares are offering 8.67% right now. Enough to generate £7,660.21 passive income from an £88.3k portfolio.
So is this actually a good investment?
Bull versus bear
As one of the highest-yielding stocks in the entire FTSE 100, Legal & General’s been getting quite a bit of attention from institutional and retail investors alike. With a long track record of continuous dividend growth dating back to 2010, the insurance and asset management group is among the most popular income stocks in 2026.
The company has been successfully capitalising on the tailwinds of the rapidly expanding pension risk transfer and retirement markets by issuing new annuities both here and in the US. And as a result, cash generation has surged, paving the way for massive dividends as well as buybacks.
However, while exciting, these payouts come with a caveat. Selling annuities today generates lots of cash up front, but also creates a long-term liability that Legal & General will need to keep paying.
To cover this expense, the firm invests across a diversified portfolio of asset classes. This alone isn’t an issue, and the group’s long track record suggests it knows how to allocate effectively. The problem is what happens if we fall into a painful recession.
Looking back at the 2008 financial crisis, Legal & General was forced to cut dividends by over 35% while the share price tanked by 80%!
What’s the verdict?
The macroeconomic landscape in 2026 is looking a bit recession-prone, especially in the UK, where unemployment and inflation are rising, while growth is stagnant. And Legal & General’s high yield is a reflection of this risk.
But with a recession scenario already partially baked into the Legal & General share price, now might indeed be a good time to consider this passive income stock for a portfolio. And it’s not the only business I’ve got my eye on today.
