Investing in dividend shares on the stock market has long been a popular way for UK residents to build a second income, and I can see why.
If you want a simple target, here is one method an investor could use to aim for up to £1,000 a month over time.
Laying the groundwork
A Stocks and Shares ISA is a useful starting point because it lets you invest up to £20k a year, with income and gains sheltered from UK tax.
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.
The key is to keep contributing regularly, even if the first sums feel small. I would rather see someone invest £500 a month for years than wait for the ‘perfect’ moment.
If we assume a FTSE 100 total return of 9.5% a year, let’s see what £500 invested every month with dividends reinvested could grow to:
- £38,643.41 after five years.
- £96,572.26 after 10 years.
- £181,053.11 after 15 years.
- £295,091.60 after 20 years.
With £295,091, a retiree could draw down the recommended 4% a year and net themselves £11,803 — almost £1,000 a month.
That’s a decent second income, built from the kind of dedicated investing that makes a retirement much easier and more comfortable.
FTSE 100 or S&P 500?
For a second income, I would not treat the FTSE 100 or the S&P 500 as an either-or choice. The S&P 500 has historically been better for rapid growth, while the FTSE 100 has usually offered a stronger dividend profile, so a mix can make sense.
UK investors could therefore consider an S&P 500 tracker for growth, alongside selected dividend shares for income.
Here are a few names income investors often look at:
- HSBC (LSE:HSBA)
- Rio Tinto
- Unilever
- GSK
- Tesco
- AstraZeneca
- National Grid
- Lloyds
- BP
- Legal & General
Why HSBC stands out
HSBC combines a sizable income stream with global scale and a strong position in Asia. That matters because its earnings are not tied only to the UK economy, so it has more ways to grow than a purely domestic bank.
The dividend also appeals to investors who want regular cash payments rather than just share-price gains.
The bank’s 2025 results showed reported profit before tax of $29.9bn, profit before tax of $36.6bn and revenue of $68.3bn. Its board approved a fourth interim dividend of 45c per share, taking the total for 2025 to 75c per share.
CEO Georges Elhedery said HSBC is “raising our ambition” and targeting a 17% return on tangible equity (RoTE) or better for 2026 to 2028.
Final thoughts
HSBC is a well-established UK business with decades of strong performance, but banks, like stocks in any sector, are never risk-free. It can still be affected by China, Hong Kong and interest-rate swings, and its credit costs rose to $3.9bn in 2025.
Still, for income-focused investors, it offers a useful mix of yield, diversification and long-term cash-generation potential. I think it’s worth considering as one part of a broader portfolio, alongside other income names in utilities, consumer staples, retail or healthcare.
If you’re looking for other shares to fill up a second income portfolio, consider a few of the other FTSE 100 options I’ve covered recently…
Should you invest £5,000 in HSBC Holdings right now?
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Mark Hartley owns shares in HSBC, Unilever, GSK, Tesco, AstraZeneca, National Grid, Lloyds, BP and Legal & General.
