A Stocks and Shares ISA has so much to offer. It lets investors contribute up to £20,000 a year, and take all their returns free of income tax, dividend tax and capital gains tax. For life.
You can even pass on your unused plot to a spouse or civil partner when you die. It’s a brilliant way to build a second income stream for retirement. But how large would an ISA need to be to generate £1,000 a week in income?
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That’s a nice round number but it’s also ambitious. It works out at £52,000 a year. Imagine getting that on top of your State Pension. You’d be nicely sorted. How much you need to generate it depends on the dividend yield produced by the underlying shares. Here’s a rough guide:
- 4% yield – £1.3million
- 5% yield – £1.04million
- 6% yield – £867,000
Those are substantial sums, but then so’s the income. More than 5,000 Britons are already Stocks and Shares ISA millionaires, showing it can be done. Someone who invested £500 a month for 30 years, and increased their contribution by 3% annually, would end up with £1.29m. This assumes average annual return of 9.5%, which is the average total return on the Stocks and Shares ISA over the last decade. You might get more, you might get less.
Could this FTSE 100 bank help investors get there?
One stock I’ve just bought is NatWest Group (LSE: NWG). Like many FTSE 100 banks, it offers both dividend income and share price growth potential.
The shares dipped after first quarter results on 1 May slightly missed expectations. Yet profits still rose 12%, while management upgraded guidance for 2026. I saw the brief sell-off as the buying opportunity I’ve been waiting for.
Over five years, NatWest shares have surged 180%. Even after that spectacular run, they still look reasonably valued with a price-to-earnings ratio of just 8.8.
The trailing dividend yield stands at 5.5%, but NatWest’s dividend policy is progressive too, which means investors may enjoy rising income over time. Forecasts suggest the income could exceed 6% this year and rise to 6.7% next year.
NatWest can afford to be generous. Profits have been climbing steadily:
- 2025 – £7.7billion
- 2024 – £6.2billion
- 2023 – £5.6billion
- 2022 – £5.1billion
- 2021 – £3.8billion
What risks should investors be aware of?
NatWest remains heavily exposed to the UK economy. If inflation and unemployment rise further, bad debts could increase while borrowing demand weakens. The sector also faces political risks. Given the scale of bank profits today, governments may decide lenders can withstand another windfall tax. NatWest shares are still up 14.7% over one year, but the pace of gains has slowed.
Even so, I still think NatWest could be worth considering for long-term Stocks and Shares ISA investors seeking both income and growth. The valuation remains reasonable, profits are strong, and shareholders are being rewarded generously.
I’m keeping a close eye on the stock and may well add to my holding if markets wobble this summer.
Should you invest £5,000 in NatWest Group Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 NatWest Group Plc made the list?
Harvey Jones owns shares in NatWest.
