The London Stock Exchange might not have an equivalent of Nvidia or SpaceX, but it’s packed with lucrative passive income opportunities.
Across the FTSE 350, I count about 60 stocks that offer dividend yields of 5% or higher. Some will end up as yield traps, of course, because dividends are never assured. But this is still more than enough to build a quality dividend portfolio.
Here then, I want to show how a five-stock portfolio worth £20,000 could throw off £1,320 in annual passive income. What’s more, this income would be totally tax-free inside a Stocks and Shares ISA.
Sound good? Let’s get started.
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 high-yield quintet
Without further ado, here are the five shares I’ve got in mind.
- Aviva (LSE:AV.)
- Domino’s Pizza Group
- Legal & General
- LondonMetric Property
- TBC Bank
Three of these are from the FTSE 100 (Aviva, Legal & General, and LondonMetric) and the other two are FTSE 250 shares.
They offer exposure to insurance, banking, property, and food. Therefore, it’s quite a balanced profile, with all of them yielding at least 6% on a forward-looking basis.
Georgian lender TBC is growing revenue and profits by double digits as it benefits from strong economic growth in its domestic market. It also runs a digital bank in Uzbekistan.
If TBC is the hare, then 190-year old Legal & General is the tortoise. It has a very established pensions business and around £1.2trn in assets under management.
Meanwhile, LondonMetric counts Alton Towers-owner Merlin Entertainments, Premier Inn and Amazon among its tenants. It has a high occupancy rate of 98%, with a focus on urban logistics (e-commerce warehouses, etc).
Finally, I’m sure Domino’s needs no introduction. This company owns, operates, and franchises the leading pizza brand across the UK and Ireland. The group recently posted its strongest growth rate in 11 quarters, with like-for like sales growth of 4.5%.
Chunky yield
The highest-yielding stock is Legal & General (7.5% on a forward-looking basis). However, as mentioned, the lowest is still 6% (Domino’s), resulting in an average portfolio yield of 6.6%, assuming the money is split evenly across the five stocks.
That chunky yield is enough to generate £1,320 a year in passive income from a £20k ISA. All five businesses are committed to growing their dividend, and four of them are buying back their own shares too.
Insurance giant
Zooming in on Aviva, this is a stock I hold myself. The insurance giant has 25m customers across the UK, Ireland and Canada. And after acquiring rival Direct Line, the group controls around 20% of the UK car insurance market.
In Q1, Aviva’s general insurance premiums jumped by 19%, while its wealth unit brought in £3.3bn of net new money. By 2028, the group looks on track to generate around £3bn in operating profit, up from £2.2bn in 2025.
Based on this, I think the passive income prospects are attractive. City analysts see the payout rising from 39.3p per share last year to 44.4p in 2027. That puts the yield at almost 6.5% by then.
As for risks, a future economic downturn is one. Meanwhile, in the here and now, rising inflation isn’t ideal for customer acquisition growth or the cost of settling insurance claims.
On balance though, I still see Aviva as a top dividend stock to consider for an income portfolio.
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Ben McPoland owns shares in Aviva, Legal & General, and LondonMetric Property.
