After all, owning the shares before this date entitles the holder to a portion of any profit that management decides to dish out. And the sight of cash hitting an account is one of life’s little pleasures.

With this in mind, here are three FTSE 100 giants that those in the midst of building an income-focused portfolio might wish to consider while there’s still time.

BT Group

Communications giant BT Group (LSE: BT.A) goes ex-dividend on 6 August. Investors will be entitled to receive 5.78p per share for their loyalty.

This follows hot on the heels of its 23 July trading update. Despite revealing flat year-on-year Q1 revenue of £4.3bn and a 4% decline in reported pre-tax profit, the firm said it was on track to achieve its targets for cash flow.

Perhaps most importantly for income seekers was BT saying that it is targeting “low to mid-single digit growth” for dividends. That doesn’t exactly quicken the pulse. But it’s also to be expected given that the firm carries a sizeable amount of debt on its balance sheet. The stock already offers a forecast dividend yield of 4.4% too. That’s higher than the FTSE 100 as a whole.

While regulatory and competitive threats must be borne in mind, a price-to-earnings (P/E) ratio of just 10 arguably reflects this.

Imperial Brands

Also going ex-dividend in August is perennial income favourite Imperial Brands (LSE: IMB). Analysts have the company poised to return almost 42p per share to those owning the stock before 20 August.

For ethical reasons, I know this won’t be everyone’s cup of tea. But Imperial’s down to yield 6% in the current financial year. This makes it one of the biggest payers in the UK’s top tier.

Part of the reason that yield is so high is that the shares have fallen 10% in 2026 so far. April was particularly tough after the company reflected that conflict in the Middle East might begin to have an impact on trading.

Still, dividends are currently expected to be covered twice by profit. So in the absence of any unforeseen disasters, the likelihood of a cut in the near future seems pretty low. A P/E of eight is significantly below the long-term average in the UK market.

Investec

Rounding off our trio of soon-to-be ex-dividend stocks is recent FTSE 100 addition Investec (LSE: INVP). It’s down to return 21p per share to investors holding before 20 August. The wealth manager also has the highest yield at the time of writing — 6.6%.

Sure, that bumper distribution doesn’t come without risk. A significant economic downturn could see a big reduction in assets under management and fees received by the company.

However, this is another example where, for now, the total payout looks set to be comfortably covered by earnings. Analysts are anticipating a 11% hike in FY28 as well!

And the valuation? The forecast P/E here is just seven. That’s not only a bit of a bargain within its peer group, it also makes it the cheapest of the bunch here.

What income stock do we like better than Bt Group Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Paul Summers has no position in any of the shares mentioned

The post These cheap passive income stocks all go ex-dividend in August appeared first on The Twelfth Magpie.

That’s why so many investors turn to the FTSE 100 to build retirement wealth and passive income streams. And right now 15 of its constituents are paying dividend yields of 5% or more.

Among these stands Imperial Brands (LSE:IMB) with a dividend per share of 163.5p and a 5.9% yield. At this level of payout, an investor would just need to buy 7,673 shares to almost perfectly match the State Pension. But that still translates into a substantial investment.

So is this actually a good idea? Let’s find out.

Tobacco, transformation, and a £2.2bn cash machine

Tobacco’s an industry nobody pretends is growing. Yet despite this, Imperial Brands is finding new ways to maintain and generate extraordinary volumes of cash year after year, regardless of the economic cycle.

Looking at the latest trading update, management reiterated its full-year guidance for low-single-digit growth from its core tobacco business. But the more exciting projection was the expected double-digit growth from its combustion-free Next Generation Products (NGPs) in Europe. And as such, free cash flow is expected to reach at least £2.2bn for the full year.

That cash is being put to powerful use. The company’s already completed £700m of its ongoing £1.45bn share buyback programme, creating structural support for its share price. And with even more buybacks planned between now and 2030, this trend looks set to continue for the foreseeable future.

The NGP momentum’s particularly encouraging. Heated tobacco Pulze 3.0’s gaining traction in Italy and Greece, its Zone brand’s maintaining volume share in the US, while new flavour launches and a fresh Malibu cigarette brand are expected to drive more growth acceleration in the second half of 2026.

So far, this all sounds rather promising. So…

Is there anything to worry about?

Even with encouraging progress, there’s no denying the structural headwinds. Combustible volumes are declining at a low-single-digit rate year after year. And that’s unlikely to reverse. Management’s push into NGPs is a direct response to this long-term trend, but even here there have been some hiccups.

For example, in the US, heightened promotional activity has depressed NGP net revenues while also compressing profit margins. Meanwhile, the firm suffered a $200m blow following a Delaware Supreme Court ruling that has quietly dented the group’s cash buffer, with a further $234m payable in instalments over the next three years.

It goes to show that while Imperial Brands is gradually moving away from traditional cigarettes, there remains a significant legal risk from its legacy products.

What’s the verdict?

The tobacco industry may be shrinking, but Imperial Brands is shrinking it profitably, converting declining volumes into rising cash flow through disciplined pricing power. And it’s using this income to invest in less harmful products for the future.

Obviously, there are glaring moral and ethical hangups about investing in tobacco stocks. And it’s why I haven’t pulled the trigger. But for investors looking for a sizeable passive income, Imperial Brands does appear to be offering a generous and, so far, sustainable payout worth mulling.

Should you invest £5,000 in Imperial Brands 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 Imperial Brands Plc made the list?

Zaven Boyrazian does not hold any positions in the companies mentioned.

The post Buying 7,673 shares in this FTSE 100 dividend stock could match the State Pension appeared first on The Twelfth Magpie.

These won’t just generate share price growth, but dividend income on top. Given that most companies aim to increase shareholder payouts every year, that income should rise steadily over time.

So how much money would an investor need to generate a passive income of £9,999 a year purely from dividends, leaving the capital untouched?

That works out at £833 a month. It’s not enough to retire on, but it would be a handy top-up for the State Pension and other pension savings. Especially because dividends earned inside an ISA are entirely free of tax. Your portfolio target depends on the dividend yield the underlying investments produce.

• At a 4% yield, an investor would need £249,975 invested.
• At a 5% yield, the required ISA pot falls to £199,980.
• At a 6% yield, it falls to just £166,650.

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.

How much do you need to invest each month?

Those numbers may look intimidating, but building wealth is a long-term process. Let’s say an investor tucked away £200 a month and got an average annual return of 9.64%, with dividends reinvested. That’s the average return on a Stocks and Shares ISA over the last decade, according to Unbiased.

After 30 years, they’d have £404,395. Which smashes all of the targets I’ve set above. Of course, share price growth and dividend income is never guaranteed. Markets fall as well as rise, and inflation means future income won’t buy as much as it does today. That’s why I’d look to increase my contributions over time. When investing, time is your biggest friend, so the key is to get started as soon as possible.

One FTSE 100 stock investors might consider for income is Imperial Brands (LSE:IMB). It has built an impressive reputation as one of the FTSE 100’s strongest dividend payers, increasing shareholder payouts every year this millennium, aside from Covid-stricken 2020.

Today, the shares offer a trailing yield of around 5.75%. City forecasts suggest this could rise to 6.05% over the next year and 6.36% in 2027.

The Imperial Brands share price is up around 75% over five years, although it’s been broadly flat over the last 12 months. After a strong run, a period of consolidation is hardly surprising. The shares don’t look too expensive today. Imperial Brands currently trades on a price-to-earnings ratio of around 10.2.

There are risks. Imperial Brands still depends heavily on traditional tobacco sales, and cigarette consumption continues to decline globally. The company is investing in alternatives such as vaping and nicotine products, but these areas are competitive and may not fully replace lost cigarette revenue.

Is Imperial Brands worth considering?

There’s also the ethical issue. Some investors simply won’t want to own tobacco companies. The sector also constantly remains at the mercy of regulatory assaults and class action lawsuits. Yet for investors comfortable with the risks, Imperial Brands could be worth considering as part of a diversified ISA portfolio.

Should you invest £5,000 in Imperial Brands 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 Imperial Brands Plc made the list?

Harvey Jones does not hold any positions in the companies mentioned.

The post How much do you need in an ISA to target a £9,999 second income that rises every year? appeared first on The Twelfth Magpie.

What’s more, dividend yields on Imperial Brands shares have consistently beaten the Footsie average of 3% to 4%.

The question is, can the tobacco titan continue delivering juicy cash rewards? City analysts are confident it can, as shown in the table below:

You might think Imperial Brands is a ‘no brainer’ share to buy for passive income, then. But here’s the thing. I think it could prove to be a classic dividend trap for investors today…

Poor returns

A large and growing dividend can be a powerful wealth builder. Reinvesting these cash payouts into additional shares creates a snowball effect that throws off even more dividends. Over time, this compounding process can supercharge portfolio growth.

But buying income stocks based solely on their dividends can be a recipe for disaster. Let’s take the case of Imperial Brands. Sure, it’s delivered dividend increases in nine of the last 10 years. Over the period, it’s also delivered an average 7.3% dividend yield.

However, Imperial Brands’ share price has tanked 26% since June 2016. The result? A meagre average annual return of 1.8%.

What’s next?

To illustrate, a £500 monthly investment in Imperial Brands shares since 2016 (with dividends reinvested) would have turned into ‘just’ £65,685 today.

The same amount put into a FTSE 100 tracker fund, meanwhile, would have delivered a far greater £98,415. That’s based on an average annual return of 9.3%.

History isn’t always a reliable guide to future performance. But the driver behind Imperial Brands’ poor returns since 2016 persists today: the steady decline of the global cigarette market.

Rival British American Tobacco said this month that tobacco industry volumes dropped 2.5% in the first half. That was worse than the 2% predicted decline, and illustrates the speed at which consumers are dumping cigarettes. The World Health Organization (WHO) expects global tobacco use to tumble almost 9% between 2010 and 2030, to 17.4% of the population.

What could turn Imperial Brands around?

Tobacco companies are rolling out alternatives like vapes and oral nicotine pouches to combat this. The problem is the costs of developing, marketing, and distributing these new technologies is massive, meaning they don’t generate any profits.

Imperial Brands’ shares actually tanked this month after it announced adjusted operating losses from these products “are expected to be moderately higher“. The question is, will its technologies like its Pulze heated tobacco ever make significant money if regulators clamp down on them as they have traditional cigarettes? I’m not convinced.

Imperial Brands’ enormous yields may make it an attractive stock for more adventurous investors. Personally, I’d rather find less risky FTSE 100 dividend stocks to buy.

Should you invest £5,000 in Imperial Brands 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 Imperial Brands Plc made the list?

Royston Wild does not hold any positions in the companies mentioned.

The post 6.7% yield! Is Imperial Brands an irresistible FTSE 100 share to consider? appeared first on The Twelfth Magpie.

Its earnings remain remarkably steady for such a mature business, supported by disciplined cost control and resilient demand. That combination continues to generate the huge cash flow that underpins its generous dividend. Yet the market still seems slow to reflect the strength of these fundamentals in the share price.

So, what sort of returns am I looking at with another £20,000 investment in the stock?

What are the potential price gains?

For professional investors, discounted cash flow (DCF) analysis remains the gold standard in ascertaining where any stock ‘should’ trade. It does this by projecting future cash flows for the underlying business and translating them into today’s money.

Naturally, the less certain those forecasts are, the heavier the discount becomes. Different assumptions here can mean analysts’ DCF outcomes vary sometimes. But using my own assumptions — including a 9.1% discount rate — Imperial screens as 47% undervalued at its current price of £27.93.

That points to a fair value of £52.70, nearly twice the present price. This gap between price and value is crucial for long-term profits as the former tends to trend towards the latter over time.

So, if this historical trend continues, £20,000 invested today could be worth £37,681 at the end of the process.

What about dividend gains too?

Dividend yields can go up and down as share prices and annual payouts change, of course. Nevertheless, analysts forecast Imperial’s dividend will rise from the present 160.32p to 167p this year, 175.6p next year, and 185.2p in 2028. These would generate respective dividend yields of 6%, 6.3%, and 6.6%.

Using the projected 6.6% as an average, my £20,000 would make £18,626 in dividends after 10 years and £124,071 after 30 years. The figures also reflect dividend compounding being used to supercharge returns.

Including the initial £20,000, the holding would be worth £144,071. And this would pay a yearly income of £9,509!

What’s under the bonnet?

Powering long-term gains in any company’s share price and dividends is a sustained rise in earnings.

A risk here for Imperial is any delay in its transition from tobacco to nicotine-substitute products. This could allow its competitors doing the same to gain an advantage. Another is tougher regulatory action in key markets, which could limit pricing power and slow the growth of next‑generation products.

Nonetheless, analysts project that Imperial’s earnings will grow a very robust 7.1% a year to end-2028 at minimum.

My investment view

Imperial Brands’ undervaluation, strong cash generation and rising dividends make it a highly attractive long‑term income opportunity, in my view.

And the market seems slow to reflect the strength of its earnings outlook, leaving a huge price-to-value gap as well.

For investors seeking income stability with price gains potential, it looks a compelling prospect to consider, I think.

I will be adding to my holding in the firm very shortly indeed. And I also have my eye on other deeply undervalued, high-yield opportunities in other sectors of the FTSE right now.

Should you invest £5,000 in Imperial Brands 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 Imperial Brands Plc made the list?

Simon Watkins owns shares in Imperial Brands.

The post Here are the stunning returns I’m targeting from £20,000 in this high-income FTSE star appeared first on The Twelfth Magpie.

That’s why many people have a Stocks and Shares ISA. They are hoping these will produce sufficient income to make a big difference later in life. But how much would be needed to produce the same amount as the current State Pension? Let’s find out.

A bit of number crunching

The top 10 FTSE 100 stocks are currently (14 June) yielding 6.6%.

A portfolio of these worth £190,121 would produce dividend income of £12,548 a year, the same as the State Pension.

But dividend shares can also serve another useful purpose. Instead of spending the payouts received, some investors prefer to use the cash to buy more shares. Why?

They do this because the dividends are a substitute for having to find new money. For example, someone starting with £10,000 could earn £660 in dividends in year one. Use this money to buy more shares and the cash received in year two would increase to £704. And so on.

After 25 years, an ISA would be worth £49,423. That’s nearly five times the initial lump sum.

Going up in smoke?

One of the FTSE 100’s top 10 yielders is Imperial Brands (LSE:IMB), the tobacco group. It’s currently returning 5.9%. Despite its above-average dividend, I recognize that some don’t like the idea of investing in the industry on ethical grounds.

However, as the chart below shows, it has a good track record of increasing its payout. Over the past 10 years or so, its yield has been consistently above 5%. Incidentally, don’t be alarmed by the drop in 2026. It pays quarterly dividends and we are only half-way through the group’s current financial year.

A useful calculator on the company’s website shows that someone who first took a stake in June 2001 will have received dividends of £26.53 a share since then. Amazingly, this is equivalent to 96.09% of the amount invested.

In a year’s time, it’s probable (there can never be any guarantees when it comes to shareholder returns) that they will have received all of their money back from dividends alone.

My view

To be honest, despite the impressive dividend history of Imperial Brands, I don’t want to invest. Due to health concerns, the group is transitioning away from cheap-to-make cigarettes that have, over the years, proven to be highly cash generative.

Now, as smoking habits change, it’s switching to alternatives like vapes and heated tobacco. However, these are also coming under scrutiny from those concerned about the long-term health impacts.

From a financial perspective, non-combustible products have lower margins and require more up-front investment. This could lead to further borrowing, which is already on the high side. I may be mistaken, but I can’t see the group’s new generation of products being as lucrative as traditional cigarettes.

It might be a few years away yet but, ultimately, I suspect Imperial Brands’ dividend will come under pressure. On this basis, I believe there are more attractive long-term passive income opportunities to consider elsewhere.

Should you invest £5,000 in Imperial Brands 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 Imperial Brands Plc made the list?

James Beard does not hold any positions in the companies mentioned.

The post State Pension of £12,548 not enough? How much would be needed in an ISA to match it? appeared first on The Twelfth Magpie.

But you can’t just pick any high-yielder or you could get caught in a dividend trap. So here’s a few things to look out for.

Which stocks are best for income

The first thing I look for is simple: visible earnings, regulated or sticky cash flows, and a balance sheet that doesn’t look stretched. That’s why sectors such as utilities, consumer staples, real estate investment trusts (REITs) and some energy groups often come up in income screens.

Here’s the basic maths. A 6% yield on £20,000 would pay about £1,200 a year. If those dividend returns were reinvested and compounded over 10 years, the payout could grow to around £2,144 – and that’s before any dividend growth is added. Contribute to the investment regularly and the payout grows exponentially.

To achieve optimal returns, most investors use a Stocks and Shares ISA because dividends and capital gains are sheltered from UK tax. That makes a big difference if you’re building income for the long term.

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.

What stocks to pick

When I try to identify income shares, I screen for a few key factors first:

• How long has the company paid dividends?
• Is the payout covered by earnings or cash flow?
• Is the debt load sensible, or is it relying on borrowing to keep distributions going?

Imperial Brands (LSE: IMB) is a good example of a stock to consider for income. The shares are up 69% over five years, the yield typically hovers near 6%, and the latest dividend payout ratio is 75.68%.

The tobacco giant’s also lifted its annual dividend by 4.5% for the past two years running, and has paid dividends for 29 years. The final dividend per share rose from 137.7p in 2020 to 160.3p in 2025.

But there’s a catch. Imperial Brands reported adjusted net debt to EBITDA of 1.8x in 2024, and it expects leverage to stay at the lower end of its 2-2.5 range.

For a tobacco business, that’s manageable, but it still deserves attention because the sector faces regulatory pressure and shifting smoking habits.

Too risky?

Investors hunting something a bit more predictable might prefer to think about British Land. It has a slightly lower 5.65% yield but with far less debt risk – it has £1.8bn of undrawn facilities and cash, with no need to refinance until late 2028.

The company’s outgoing chief executive, Simon Carter, recently said:

“The continued occupational strength of our key markets and the resulting above inflation rental growth gives us confidence for the future.”

Quick comparison:

These two examples highlight the key trade-off. Imperial Brands may look attractive on yield, but British Land offers a more predictable backdrop.

So investors must ask themselves which matters more: a higher dividend yield, or a more reliable payout?

Should you invest £5,000 in Imperial Brands 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 Imperial Brands Plc made the list?

Mark Hartley owns shares in British Land.

The post How to invest £20k in FTSE 100 stocks and target a 6% dividend yield appeared first on The Twelfth Magpie.

Today, two FTSE 100 shares in particular have caught my attention: Imperial Brands (LSE:IMB) and JD Sports Fashion (LSE:JD.). Their price-to-earnings (P/E) ratios of 10 times or below suggest — for one reason or another — that they are worth serious consideration.

But in reality, are these FTSE stocks brilliant bargains or classic value traps?

Industry-leading value

At £26.53, Imperial Brands shares carry a forward P/E ratio of 9.9. That suggests excellent value compared to the broader tobacco sector, whose ratio sits at 14.5.

The company owns some of the world’s leading tobacco brands. These include JPS and West, labels that enjoy incredible pricing power. Imperial Brands is also investing heavily in fast-growing combustibles, and owns the blu vape and Pulze heated tobacco devices.

The result? Sales are still growing even as wider tobacco demand falls. But the red lights are flashing and revenues are under pressure, growing just 1.8% in October-March. I think investors could be in for a shock in the months ahead as cigarette usage fall sharper than many industry insiders predict.

FTSE 100 rival British American Tobacco announced yesterday (2 June) industry volumes were down 2.5% in the first half. That was sharper than the 2% fall the firm itself had been predicting. But it’s not just sales of traditional products that are in increasing danger. It’s possible that sales of vapes and so on could also wildly disappoint..

According to Hargreaves Lansdown,

There is some evidence to suggest that these products pose a reduced health risk compared to cigarettes, but they are coming under increasing scrutiny, with some products already banned in the US.

Are these risks adequately reflected in Imperial Brands’ share price? I’m not convinced.

Sporting hero?

Could JD Sports Fashion be a better value stock for me to buy? It’s even more attractive based on its forward-looking P/E ratio. This is 8.4 times, some distance below the long-term average of 16-17. Time to pile in?

Possibly, although the risks here also deserve serious consideration. Sales have picked up more recently in key markets like the US, though questions swirl over whether this can continue as inflation spikes again. Looking longer term, I’m also mindful of the growing popularity of Chinese sportswear brands and the danger this poses to JD Sports’ key partners like Nike and Adidas.

Yet, on balance, I believe the shares represent an attractive growth opportunity. The outlook for the broader athleisure market remains robust as consumer lifestyles and tastes evolve. Grand View Research analysts expect the global market to grow at an annualised rate of 9.9% between now and 2033, to $892bn.

Encouragingly for investors, JD Sports has significant exposure to North America and Asia following heavy recent expansion. These are the world’s largest and fastest-growing athleisure markets respectively. With a focus on the white-hot premium market, too, there’s a good chance in my view that the firm significantly outperforms the market.

It’s not without risk. But at just 84.1p, I think this could be one of the FTSE 100’s best recovery stocks to buy.

Should you invest £5,000 in Imperial Brands 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 Imperial Brands Plc made the list?

Royston Wild does not hold any positions in the companies mentioned.

The post 2 FTSE 100 bargain stocks to buy in June? appeared first on The Twelfth Magpie.

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.

How big should my pension be?

That works out at £8,004 a year. It won’t be enough to live on in retirement, but combined with the State Pension, ISA investments and other sources of income, it will certainly help. The amount required depends entirely on the yield generated by the portfolio.

• With a 4% yield, an investor would need roughly £200,100.
• At 5%, the total falls to around £160,080.
• At 6%, the figure drops again to roughly £133,400.

Targeting stocks with higher yields will naturally reduce the amount of capital you need, but investors need to check those dividends are sustainable in the longer run.

FTSE 100 tobacco giant Imperial Brands (LSE: IMB) has a terrific track record of paying dividends. It’s increased shareholder payouts every year this millennium, with the excusable exception of the pandemic year of 2020. Tobacco shares continue to deliver remarkable returns despite smoking rates declining across much of the developed world.

Imperial Brands has used strong branding, pricing power and customer loyalty to squeeze bigger profits from a shrinking market. It has also expanded into alternatives including heated tobacco and vapes.

Its shares have climbed steadily too. They’re up almost 70% over five years, with dividends on top. But in the last three months they’ve fallen 16%. The price-to-earnings ratio has fallen to just 8.5, suggesting value. Some investors will see this as a buying opportunity but why the dip?

Half-year results (14 May) showed underlying operating profit rising just 0.6% to £1.6bn. Management still expects annual profit growth of 3% to 5% over 2026, but needs a much stronger second half to hit that target. It won’t be easy amid signs that the cost-of-living squeeze is hitting smokers.

Can the shares continue to outperform?

Imperial Brands still expects free cash flow of at least £2.2bn this year, which comfortably supports the dividend. The forward yield is a juicy 6.3%.

Tobacco stocks won’t suit everybody. I don’t buy them myself, but often wish I did. There are threats though. Smoking volumes continue to decline, regulators remain hostile and nobody yet knows whether next-generation products will replace traditional cigarettes, or spark a legal backlash.

Imperial Brands remains highly profitable and hugely cash generative. Personally, I think it’s one of today’s stronger income plays and well worth considering. For those who fancy Big Tobacco I can see a heap of FTSE 100 dividend stocks to consider instead. Some have even more generous yields.

Should you invest £5,000 in Imperial Brands 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 Imperial Brands Plc made the list?

Harvey Jones does not hold any positions in the companies mentioned.

The post How much do you need in a SIPP to earn a £667 monthly passive income? appeared first on The Twelfth Magpie.

Its earnings remain remarkably steady for such a mature business, supported by disciplined cost control and resilient demand.

That combination continues to generate the huge cash flow that underpins its generous dividend.

So, what sort of annual returns are we looking at over time from this?

How large could the dividends grow?

Over the past five years alone, Imperial Brands has paid respective dividends for 2021 of 139.08p, then 141,17p, followed by 146.82p, 153.42p, and 160.32p. These have generated average yields in those years of 8.9%, 7.6%, 8.8%, 7.1% and 5.1%. The variable yield, despite rising dividends, illustrates that returns change in line with share prices — up and down.

The current dividend yield stands at 5.7%, well above the present FTSE 100 average of 3.1%.

However, analysts forecast the stock’s return will increase to 6.1% this year, 6.5% next year, and 6.8% in 2028.

What does that mean in cash terms?

Another £20,000 investment from me would make £19,402 in dividends after 10 years and £132,929 after 30 years. The figures are based on the forecast 6.8% as an average and on the dividends being reinvested into the stock.

This allows the full turbocharging effect of ‘dividend compounding’ to kick in. It is a similar idea to leaving interest to accrue in a savings account. And over 30 years — the standard investment cycle for long-term investors — the results can be extraordinary.

In this case, after 30 years, the total value of the holding (including the £20,000 initial stake) would be £152,929. And this would pay a yearly income of £10,399!

How strong is the underlying business?

To maintain a rising dividend trend, a company needs to keep its profits increasing over time.

A risk to Imperial Brands here is any tougher regulatory action in key markets that could limit pricing power. Another is any long‑term decline in nicotine product volumes across developed markets to add to the fall in cigarette volumes.

Nevertheless, analysts expect Imperial Brands’ profits to increase by a steady 4% a year to end-2028 at minimum.

This looks well supported to me by the company’s current guidance for 3%–5% adjusted operating profit growth this year. It reflects the firm’s five-year strategy to expand its smoking alternatives business while maintaining its traditional tobacco operation.

My investment view

Taken together, these factors paint a picture to me of a business with both the stability and pricing power needed to sustain long‑term dividend growth.

There are risks, of course, as in all businesses, but they look well understood and largely reflected in today’s valuation.

With earnings expected to rise steadily and cash generation remaining strong, the dividend outlook appears well supported.

And for income‑focused investors, that combination of visibility and value is hard to ignore. It leaves Imperial Brands looking like a dependable passive‑income option to consider for the years ahead.

I will be buying more of the stock very shortly. And I am also looking at other high-yield stocks that appear bargains at current pricing.

Simon Watkins has positions in Imperial Brands Plc. The Twelfth Magpie has recommended Imperial Brands Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor and Hidden Winners. Here at The Twelfth Magpie we believe that considering a diverse range of insights makes us better investors.

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