A weekly £666 might not seem like the most obvious of passive income targets for a Stocks and Shares ISA. To me, it’s a figure that makes perfect sense.
Want to know why? Read on.
Devil’s in the detail
Today, the State Pension is £12,548 a year. According to Pensions UK, the average Brit needs an annual income of £43,900 to live comfortably.
The result? A shortfall of £31,352 that investors need to make up with ISAs, SIPPs, or through other means.
But I’m not aiming to make up that exact amount. I’m looking for more, in case the State Pension doesn’t keep up with the rising living and social care costs.
This is where my £666 a week second income goal comes from. That would give me an extra £34,632 a year for me to live on — roughly £3,000 higher than today’s shortfall. That’s a pretty decent buffer in my book.
Just £442 a month
Yet, achieving a near-£35,000 passive income each year will be no easy feat. To hit that target, an investor will need to commit to investing regularly and building a diversified portfolio of mainly stock market winners. Most importantly, they’ll need to take a patient, long-term approach.
However, building an ISA that can provide a cash stream like this may be easier than you think. Let’s say you invest £442 a month in a well-crafted portfolio of global shares, funds, and trusts. If you can achieve an average 9% annual return over 25 years, you’ll have a portfolio worth £494,743.
If that was then invested in 7%-yielding dividend shares, you’d reach that magic £34,632 annual passive income.
Boost your chances
There is no universal strategy that fits every investor. But a few timeless principles are worth keeping in mind.
These include:
- Investing regularly through market upturns and downturns.
- Creating a diversified portfolio of 15 or more shares.
- Buying companies with operations across different regions, industries, and sub-sectors.
- Holding both growth and income shares for portfolio growth and a stable long-term return.
- Reinvesting dividends to maximise the compounding effect.
I personally own a wide selection of shares from across the world. I hold individual shares like Legal & General, Diageo, and Aviva from the FTSE 100. I also have exposure to a greater range of US shares thanks to tracker funds like the HSBC S&P 500 ETF.
I also recently increased my position in Primary Health Properties (LSE:PHP). Want to know why?
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.
A 7.8% opportunity?
Put simply, Primary Health is a cash machine that’s supported by its huge and dependable rent rolls. The real estate investment trust (REIT) has more than 1,100 properties on its books. Last year its rent rolls were a colossal £342m.
So what does this mean for investors? An enormous and growing dividend, that’s what. Shareholder payouts are on course to rise for their 30th straight year in 2026. This also means a large 7.8% forward dividend yield.
As with any share, there are risks to owning Primary Health Properties shares. Rising interest rates could impact earnings and therefore future dividends. But long-term, I still believe it’s one of the best passive income stocks for me to buy. Its focus on an ultra-defensive real estate sector provides dividend visibility that few other UK shares provide.
