Step by step

One advantage of using an ISA for this strategy is that the dividends received are tax-exempt. This means that the full amount of money is received and then can be used as cash flow to buy more stock. Over time, this can really compound.

I don’t see the £20k annual cap as much of a disadvantage, as for most of us it won’t be exceeded. Instead, it allows an investor to put to work a regular amount each month. To determine how much needs to be invested to hit the target, we need to estimate the portfolio’s yield.

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.

Based on buying FTSE 250 and FTSE 100 dividend stocks, I think it’s possible to target a 7% annual yield. Of course, a higher figure can be targeted, but I feel this increases the risk too much.

If we use the 7% figure to hit £740 monthly, the ISA would need to be worth £126,857. So if someone made full use of the £20k each year, this could be possible to reach in just a few years. However, let’s say someone invested £500 a month. In this scenario, it would take just over 13 years to achieve.

Of course, these are just projections. Depending on what happens to the stocks picked in the years to come, the target time could be longer or shorter than planned.

A strong dividend contender

After the figures, the next important step is to fill the ISA with sustainable dividend ideas. One example is OSB Group (LSE:OSB). The stock’s flat over the past year but boasts a dividend yield of 7.1%.

It’s a specialist lender focused on niches of the UK mortgage market that larger high-street banks often overlook, but makes money in a similar way. It gathers deposits from savers and then lends that money out at higher interest rates. The difference between what it earns on loans and what it pays on deposits is known as the net interest margin (NIM), and this remains the key driver of profitability.

As for the dividend, the company boasts a dividend cover ratio of 1.95. Any figure above 1 means the income is completely covered by the latest earnings per share and is a good sign. In fact, management recently lowered its long-term capital target, potentially freeing up more than £100m for shareholder returns, such as dividends. That also suggests the board sees excess capital generation continuing over the coming years

In terms of risks, CEO Andy Golding said in an April trading update that “we are mindful of the ongoing uncertain geopolitical situation and its impact on the UK economy”.

It’s true that the company is heavily exposed to the fate of the UK, and things are quite fragile as we stand.

Even with that, I think the stock could be a good one for investors to consider as part of building up a solid ISA.

Should you invest £5,000 in OSB Group 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 OSB Group made the list?

Jon Smith has no positions in the shares mentioned

The post Here’s how much someone would need in a Stocks and Shares ISA to make £740 a month appeared first on The Twelfth Magpie.

The London Stock Exchange is packed with generous dividend payers, and right now there are 42 FTSE 350 names offering yields of 6% or more. And among them, I’ve been looking closely at two stocks in particular, both yielding 6.8%.

Is OSB Group’s yield worth the risk?

OSB Group‘s (LSE:OSB) a specialist lender focused on buy-to-let and residential mortgages, funded mainly through retail savings. It targets niche segments such as professional landlords, commercial property and more complex borrowers, using broker distribution and its Kent Reliance and Charter Savings brands.

The bull case starts with the numbers. In its latest first-quarter update, OSB grew its net loan book by 0.9% to £26.2bn, with new lending up 11% to £1.2bn alongside retail deposits rising by 1.8%.

Combining this lending portfolio with solid credit quality, robust regulatory capital buffers, and a recently launched £100m share buyback programme, OSB appears to be in fairly healthy shape.

However, the company’s firmly tied to the UK housing and mortgage cycle. Management’s clear that its net interest margin guidance of around 2.25% ultimately depends on external factors like interest rates.

A tougher macro backdrop, stickier inflation or renewed pressure on mortgage affordability could all squeeze margins and slow loan growth which, in turn, would put its generous dividend under more scrutiny.

Is Hilton Food a tastier ISA pick?

Hilton Food Group (LSE:HFG) operates in a very different space. It’s a food packing and processing business that supplies fresh meat, seafood and prepared foods to major supermarkets across the UK, Europe and further afield.

Like OSB, its latest trading update was encouraging. Hilton confirmed that full‑year guidance is unchanged, with adjusted pre-tax profits still expected in the £60m-£65m range.

Core meat and fresh prepared food businesses are trading well, with positive momentum in Australia, New Zealand and Central Europe, and slightly higher volumes in Western Europe compared with last year.

But like any business, it’s not all plain sailing. Seafood, vegetarian and vegan operations remain challenging, and the group’s pushing cost-cutting measures at its Seachill unit while working to improve performance at Foppen and Dalco.

Capital expenditure is expected to be about £100m this year, meaning net debt will rise as Hilton invests in new capacity in Canada, Saudi Arabia and Poland.

For ISA investors, that mix of growth capex and higher leverage is a risk factor that needs to be monitored.

Which looks better?

For me, both stocks have appeal, but in different ways. OSB Group offers classic financial‑sector income. It’s a high-yield supported by strong capital, buybacks and disciplined lending, but with clear exposure to interest rates and the UK housing market.

Hilton Food Group looks more defensive, with sticky supermarket contracts and global diversification, offset by pockets of underperforming business lines and rising investment spend.

In a diversified Stocks and Shares ISA, I could see a case for holding both. But personally, I think OSB’s higher-octane financial income could be the more lucrative of the two, albeit at a higher level of macroeconomic risk.

Nevertheless, for investors seeking promising tax-efficient income opportunities, both could be worth a deeper investigation.

Should you invest £5,000 in Hilton Food 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 Hilton Food Group Plc made the list?

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

The post 6.8% yields! 2 UK shares to consider for a Stocks and Shares ISA? appeared first on The Twelfth Magpie.

It can also help everyday investors solve one or more specific goals. A few examples include:

• Pay off a mortgage.
• Top up a pension.
• Reinvest to grow a future income stream.

By investing in stock market shares, you can target income in two ways:

• Capital gains: selling shares for more than you paid.
• Dividend income: cash paid by a company to shareholders.

Both matter, but they behave very differently and impact how reliable your second income will be. So how should you think about the trade-off?

Growth stocks vs dividend stocks. What are the differences?

Growth stocks target capital gains, with US technology names dominating the last decade. UK investors can gain exposure to US tech stocks through funds such as Polar Capital Technology Trust or Scottish Mortgage Investment Trust.

Dividend stocks, on the otherhand, typically have slow growth but reward shareholders regularly. They’re more popular in the UK, usually with higher yields than many US peers.

A few well-established names include Legal & General, Unilever, British American Tobacco, Severn Trent, LondonMetric Property and Halma.

Which method you ultimately choose depends on whether you want cash now or bigger balances later.

Quick comparison table:

How much income could be earned?

Stock index returns vary by region and period. Over the past decade, US indices such as the S&P 500 and Nasdaq typically returned between 13% and 15% annually; MSCI World returned between 7% and 9%; and FTSE All-World returned between 11% and 12%.

Using those as context, a diversified mix of domestic and international shares could reasonably target total returns near 10%-11% over the long term.

Even just a £200 a month invested over 10 years at those rates, could compound to between £41,510 and $43,997. That would be a decently-sized portfolio to start targeting meaningful income.

Why I like dividends

Dividends give you immediate cash without selling shares, or the choice to reinvest and accelerate compounding. For example, the British specialist mortgage lender OSB Group (LSE: OSB) pays a dividend of 35p per share annually and may be one to consider.

At the current share price of 501p, that equates to a yield of 7%. But a high yield means little if the payments aren’t well-covered by company funds. In this case, the FTSE 250 bank reports a 46.7% payout ratio and 2.83 times cash coverage, which is more than sufficient.

To provide added confidence, it has a 12-year-long payment record, and has increased its dividends every year since the pandemic ended.

The bank also announced a £100m share buyback, which further supports shareholder returns. But there are risks: OSB’s latest results show profit before tax down 9% to £382.5m, which highlights how a weak UK economy can hit smaller challenger banks harder.

That’s why it’s critical to build a diversified portfolio of shares, with some more highly established FTSE 100 blue-chips helping to reduce volatility during tough periods.

Should you invest £5,000 in OSB Group 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 OSB Group made the list?

Mark Hartley owns shares in OSB Group Legal & General, Unilever, British American Tobacco and Scottish Mortgage Investment Trust.

The post Here are 2 ways to target a second income on the stock market with just £200 a month appeared first on The Twelfth Magpie.

The company in question is OSB Group (LSE: OSB), a specialist mortgage lender listed on the FTSE 250. It’s made up of two segments. The first is OneSavings Bank, which focuses on buy-to-let, residential development and commercial property lending. The second is Charter Court, which owns brands such as Kent Reliance, InterBay and Precise Mortgages. So it’s not your standard high street bank.

Why are the shares so cheap?

It’s a pretty sizeable operation, with a market cap of £1.76bn. But here’s the exciting bit. Today, it has a brilliant trailing yield of 6.59%. And it combines that with a low price-to-earnings ratio of 6.75.

For me, that’s almost the perfect combination. It allows me to get in at a bargain price, and lock into a high rate of income. Of course, investing is never that simple. There’s a reason why OSB is cheap today, and you’ve probably guessed it.

The shares have had a bumpy year, falling 20% so far in 2026. Over five years they’re up just 9%. So what went wrong?

The OSB share price spiked in the final months of 2025, as investors priced in a string of interest rate cuts as inflation looked set to retreat. This was expected to revive the housing market, and unleash a fresh wave of mortgage demand.

You know what happened next. The Iran war and oil price spike completely reversed those expectations, and knocked the shares back.

But it wasn’t all down to the Middle East. Full-year results (5 March) revealed that profits dropped by 8.5% in 2025, due to an impairment charge, higher admin costs and fair value losses. Return on tangible equity slipped from 14.9% to 13.7%.

The board cheered investors with a £100m share buyback, and by hiking the dividend 5% to 35.3p per share. But it wasn’t enough.

Is now a good time to buy this FTSE 250 stock?

On 30 April the board hailed its “resilient” performance so far this year, with both the net loan book and retail deposits both rising. Naturally, it’s worried about the geopolitical situation.

I’m also worried about the impact of the Renters’ Rights Bill on the buy-to-let market, which is said to have sparked an exodus of landlords. That could hit OSB’s specialist BTL lending platform, Rely, launched only last year.

Even if we do get some kind of Iran deal, the inflation risk and uncertainty is likely to linger for some time. I think OSB is worth considering with a minimum five-year view, but it’s likely to remain bumpy in the shorter run. At least investors will get a handsome rate of income while they wait. I’ll be keeping a close eye on OSB, because it has the potential to make a storming recovery when conditions improve.

Should you invest £5,000 in OSB Group 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 OSB Group made the list?

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

The post A 6.6% yield and a P/E of just 6.75! Is this UK income stock a screaming buy? appeared first on The Twelfth Magpie.

Companies share a portion of their profits directly with shareholders providing a steady stream of cash without you needing to lift a finger. 

This passive income is a powerful tool for building long-term wealth, especially when you reinvest those payouts to buy more shares. In this way, the magic of compounding returns really shines.

Two dividend prospects

While many investors flock to the glamour of the FTSE 100, the FTSE 250‘s often where the real gems hide. These mid-sized companies are frequently overlooked by the big institutional funds, which can lead to higher yields and better value for the individual investor.

If you’re looking to boost your portfolio’s income, I’ve been keeping a close eye on two particular names: OSB Group (LSE: OSB) and Aberdeen Group.

Both currently offer similarly atttractive yields, but may appeal to different investors in other ways.

OSB Group

I’ve already held shares in this challenger bank for several years and I’m considering buying more. The stock remains a compelling option for those chasing both income and value, though it comes with specific trade-offs.

Let’s take a look at its numbers:

• Yield: 6.8%.
• Payout ratio: 46.7% (a comfortable margin of safety).
• Cash coverage: 2.83 times (easily covers payments).
• Track record: 12 years of consistent payouts.
• Valuation: forward price-to-earnings (P/E) ratio of 6.56 (undervalued).

Overall, it looks like a good option for both value and income.

However, investors should note the balance sheet looks somewhat stretched, with liabilities currently exceeding current assets. If changing market conditions or falling interest rates dent its income, it’s financial position could become risky. 

Aberdeen Group

If you prefer a steadier hand, Aberdeen Group might be more up your street. It’s less of a pure value play than OSB, but it boasts a significantly more reliable historical track record.

• Yield: 7%.
• Payout ratio: 67.4%  (sufficient).
• Cash coverage: 2.29 times (covers payouts).
• Track record: 20 years of consistent payments (impressive).
• Valuation: forward P/E ratio of 14.10.

Aberdeen’s coverage is more limited but its balance sheet is solid. With equity far exceeding total debt, there’s less chance of debt obligations prompting a dividend cut. However, as a global investment group, market fluctuations can significantly impact its share price.

So what does this all mean for investors?

While both stocks offer a similar yield, the choice comes down to your personal risk appetite when considering whether to buy.

OSB Group offers a cheaper valuation if you are willing to overlook the tighter balance sheet, whereas Aberdeen provides the reliability of a longer, proven history and a stronger financial position.

While dividends remain one of the most reliable ways to generate passive income in an unpredictable market, remember that income’s only half the battle.

A healthy portfolio should also include some growth and defensive stocks, ensuring you aren’t putting all your eggs in one basket. 

Sector diversification is your best friend here. By spreading your risk across different industries, you ensure that a downturn in one area doesn’t derail your entire plan.

Keep your eyes on the long term, stay disciplined, and let those dividends do the heavy lifting for you.

The post Hunting passive income? Consider these high-yielding FTSE 250 dividend stocks to buy in May appeared first on The Twelfth Magpie.

For example, say you want to bring in £750 a month. That’s equivalent to £9,000 a year, which should be withdrawn using the recommended 4% rule. The idea is that by taking out only 4% a year, you don’t rapidly deplete the overall capital.

So for that much income, you’d need a pot of around £225k (£9,000 is 4% of £225k).

Naturally, to build a pot that big takes dedication, patience, and good stock-picking skills. But how does that look in practice?

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.

Building £225k with monthly investing

Let’s say you invest £300 a month into your ISA. Working with a realistic average annual return of 8% a year, the growth could compound as such:

Within 15 years, it could exceed £100,000 and after 20 years, it would be about £171,000. In less than 25 years, you could hit the £225k target.

These are only estimates, not guarantees, but they show how regular contributions plus compounding can snowball into a serious income-producing pot over time.

So how can an investor optimise their chances of achieving those returns? 

Targeting 8%+ returns

To aim for 8% or higher, I’d focus on a diversified basket of solid dividend payers mixed with a few quality growth stocks. A mix across sectors (banks, consumer stocks, healthcare, tech, infrastructure) helps to reduce the risk of concentrated losses in one area.

On the FTSE 100, some examples include HSBC, Legal & General, GSK, and National Grid. But the mid-cap FTSE 250 index shouldn’t be overlooked.

One example of a promising mid-cap income stock is challenger bank OSB Group (LSE: OSB).

A closer look at OSB Group

OSB focuses on specialist lending, such as buy-to-let and residential mortgages. It’s made impressive progress over the past decade, up 87.7% in the past 10 years. With dividends included, the total shareholder returns ramp up to 272% — an annualised return of 14% a year. 

If it continued on that trajectory, it would make an excellent addition to a passive income portoflio.

Its dividend yield is 6.3%, with a payout ratio of 46%, so it’s well covered by earnings and has room to be increased if profits grow.

But with heavy exposure to the UK mortgage market, a weak economy, falling property prices, or higher borrower defaults could hit profits. If the Bank of England cuts rates and borrowers refinance at cheaper deals, it could limit future growth.

Still, management’s delivered continuous, uninterrupted dividends for 12 years, and the bank generates a return on equity (ROE) of roughly 12.6%. That’s a strong sign it’s making solid profits on shareholders’ capital.

The bottom line

For UK investors building ISA income, a stock like OSB is worth considering. The attractive yield plus potential capital growth would speed up the journey to £225k.

But the key is not to bet everything on one name. By combining several resilient dividend payers and growth stocks with a multi-decade outlook, your ISA has a better chance of reaching that goal.

The post How much do I need in an ISA to target £750 a month of passive income? appeared first on The Twelfth Magpie.

OSB Group (LSE: OSB) has results due on 5 March. Shareholders in the UK’s big banks might look at Bank of England base rate cuts with trepidation. That’s because they could have a significant impact on their net interest margins and therefore profits.

Strength in agility

OSB is a specialist mortgage lender, and describes itself as “primarily focused on carefully selected sub-segments of the mortgage market such as Buy to Let, Residential, complex commercial and semi-commercial, development finance, bridging and asset finance“.

By being so focused, it can maximise efficiency. It showed in the bank’s first-half results in June, which included a 40.3% cost-to-income ratio. By comparison, Lloyds‘ equivalent was up at 58.6% at the last count.

The smaller and less capital-intense nature of a lender like OSB can also be a weakness. It’s more likely to suffer more during a downturn, as the UK’s challenger banks more recently did.

But there’s an expected 5.6% dividend yield, with analysts predicting progressive annual rises. This could be a good time to consider putting a bit of ISA cash into OSB.

Recovery building steam

The underlying business at ITV (LSE: ITV) looks like it’s getting back on track — though the shares haven’t followed yet. Analysts expect rising earnings and dividends in the next few years. It all starts from 2025 results, also due on 5 March.

In a Q3 trading update in November, ITV told us its “performance for the 9 months to the end of September was better than market expectations“. CEO Carolyn McCall also spoke of “a good performance in a tough advertising market,” telling us “both our businesses are performing well, reflecting the significant transformation we have delivered.”

Looking forward, she said: “We continue to expect to outperform the broadcast advertising market in Q4, and have a strong programme slate for Q4 and into 2026, including the men’s 2026 Football World Cup.“

The advertising market is a fickle one, so there’s always going to be strong competition in that part of ITV’s business. Broadcast content is so often seasonal too. This year there’s the World Cup, but future events coverage is a big unknown.

Still, even with those uncertainties, a 6.2% forecast dividend yield has to make ITV another worth considering for long-term income investors.

Other dates to watch

Investors looking for more dividend shares to consider could do well to keep their eyes open for results from Aberdeen. Due on 2 March, there’s a 6.8% yield on the cards.

Then on 12 March and 16 March respectively, we’ll have the latest from FTSE 100 giants M&G and Phoenix Group Holdings. Forecasts suggest a 6.3% yield from M&G, and 7.1% from Phoenix.

All of these stocks are on my dividend candidates list for 2026.

The post Mark your March diaries with these key dates for red-hot UK dividend shares appeared first on The Twelfth Magpie.

Here, nimble challenger banks such as OSB Group (LSE: OSB) and Metro Bank (LSE: MTRO) are plotting a different path forward. While they represent two very different investment theses, both offer compelling reasons to consider them as part of a diversified, income-focused portfolio in 2026.

Why challenger banks?

Here’s the uncomfortable truth for the Big Four: when interest rates fall, their profit factories slow. These heavyweight lenders depend on wide margins — the spread between what they pay savers and what they charge borrowers. Lower rates squeeze those margins, which is why FTSE 100 banks are justifiably nervous about the Bank of England’s expected rate cuts in 2026.

Challenger banks however, operate a different playbook. In most cases, they’ve built lean, technology-driven operations with lower cost bases and strategic niche focus. They don’t compete on the same terms as the Big Four. More importantly, they’ve already navigated the turbulent waters of earlier near-collapses or restructuring, pricing in risk and making it more manageable.

For example, Metro Bank’s 2023 crisis was brutal, with 1,500 job cuts, branch closures, and underperforming loan book sales. It was a painful restructuring but resulted in a lean, focused, and strategically-positioned bank operating high-margin lending segments like corporate, commercial, and SME banking.

Meanwhile, OSB’s maintained steady profitability with a razor-sharp 40% cost-to-income ratio, demonstrating operational discipline even as margins compress.

Two opportunties, two angles

OSB Group’s the immediate income solution here, with a 5.4% dividend yield — far higher than the FTSE 100’s average. The bank raised full-year profit guidance to at least £300m for 2026, signaling management confidence amid economic uncertainty. Wth a price-to-earnings (P/E) ratio of just 4.9, it’s trading at a significant discount to the market, suggesting growth potential if execution continues.

Still, it’s not immune to economic policy changes. In H1 2025, the bank’s earnings declined 20% year-on-year due to lower net interest income. It must meet its guidance targets or risk shaking investor confidence.

Metro Bank’s the more speculative play, but arguably the more exciting one. The bank returned to profitability in 2024 and is targeting double-digit returns in 2026, and mid-to-upper-teens thereafter. Its net interest margin’s expected to expand from 3% to nearly 4% this year, driven by disciplined asset rotation toward higher-yielding corporate and SME lending. If the bank executes this move successfully, it could be the turnaround story of 2026.

But its goals are ambitious and on the background of 2023’s near-collapse, it can’t afford to slip up. Everything hinges on it delivering on estimates, or the next collapse could be permenant.

Final thoughts

While both these challenger banks could face some margin pressure from falling rates, their strategic positioning and operational improvements make them worth considering. In many ways, they have advantages (and buffers) that the Big Four simply can’t compete with.

For retirement-focused investors seeking diversification beyond the big players, FTSE 250 challenger banks offer a compelling alternative to think about. Whether seeking growth opportunities or steady income, the mid-cap index offers a wide variety of options.

The post Why I’m bullish on FTSE 250 challenger banks in 2026 appeared first on The Twelfth Magpie.

But there are some shares that play for both sides, delivering dividend income along with impressive capital gains. I’ve identified two that hit the ball out the park in 2025 – International Personal Finance (LSE: IPF) and OSB Group (LSE: OSB).

Combined, they delivered a 94.5% total return when accounting for both growth and dividends. That means a £5,000 investment split equally across both shares when 2025 began would be worth almost £10,000 today!

But what drove their success and can this continue in 2026?

The lesser-known asset manager

International Personal Finance operates home‑credit and digital lending businesses across several international markets, with London‑listed UK shares. The business enjoyed a spectacular year of growth in 2025, despite pressure on household budgets. The share price grew 78.5% and when adding dividends to the mix, it returned a near-100% total.

Despite a 6.4% drop in revenue in H1 2025, earnings jumped 57% as costs and impairments were tightly controlled. Profit margin improved from 5.3% to 8.9%, with earnings per share (EPS) up from 8.8p to 14p in the half.

But if a lower-rate environment transpires, there’s a growing risk of tighter regulation or political scrutiny for the personal finance sector. As a smaller lender, it’s more exposed than larger competitors if the government cracks down on high-cost consumer credit.

For patient investors, International Personal Finance’s combination of low valuation and improving profitability is attractive. However, its exposure to consumer health and regulation is risky, so position sizing and diversification matter when considering it.

The up-and-coming challenger bank

OSB Group’s a specialist lender focused on buy‑to‑let and niche residential and commercial mortgages. Despite a tough backdrop of higher rates and cautious landlords, it delivered what management called a “resilient” performance in 2025: modest loan book growth, strong capital ratios and an increased interim dividend.

The shares grew a moderate 60% but when adding dividends, its total return surged to almost 88%.

In H1 2025, the bank achieved a pre‑tax profit of £192.3m, down year‑on‑year but still generating a solid 13.7% return on tangible equity. It also reported a net interest margin of 2.3%, with retail deposits growing and a successful £578m securitisation improving funding efficiency.

But if interest rates drift lower, things could change. Although a softer rate environment reduces stress on existing borrowers, its margins could suffer if lending rates re‑price down faster than savings. 

For long‑term investors, OSB looks like a promising option to consider right now. It took a hit when rates shot up but is well‑placed to benefit from a controlled descent — barring a slip into a deep recession.

Final thoughts

For investors saving for a home or retirement, it’s important to consider how falling rates can impact a portfolio. Certain UK shares have proved they can cope when rates are high and still stand to benefit if 2026 delivers the anticipated soft landing rather than another shock.

The above two examples reveal how strong businesses can come out of a tough year in good shape – but also how different their risk profiles are once policy starts to shift.

The post £5,000 invested in these 2 UK shares at the start of 2025 is now worth… appeared first on The Twelfth Magpie.

So I decided to call in ChatGPT. I’d never allow artificial intelligence (AI) to pick stocks, because it struggles with facts and doesn’t have opinions of its own. But it can throw up a few ideas.

I was hoping for some surprise picks or insights, but it started by naming the two most obvious FTSE 100 income stocks I could imagine.

Legal & General Group

The first one is so obvious, I hold it myself, asset manager and insurer Legal & General Group (LSE: LGEN), which doesn’t coincidentally have the highest trailing yield on the blue-chip index, at 8.2%.

ChatGPT said it offers financial sector exposure with strong income potential, adding: “It benefits from recurring cash flows and its payout is generally well-covered by earnings”.

I’m unconvinced. Ideally, shareholder payouts should be covered twice by earnings. Legal & General’s dividend cover is just 0.94. That’s my biggest worry about this stock, yet ChatGPT showcased it as a key benefit. Worrying.

My second concern is that the Legal & General share price has underperformed, due to three years of volatile earnings. Although this might be an opportunity, giving its scope to play catch-up with sector rivals.

Either way, I think the shares are worth considering, for long-term income seekers. Legal & General has a strong balance sheet, and I believe the dividend should hold. No guarantees though.

British American Tobacco

The next tip was equally predictable, but maybe that’s not a bad thing. ChatGPT named British American Tobacco (LSE: BATS), calling it a globally-recognised tobacco business with a long history of generous dividends. It also noted that “yields have trended well above the FTSE 100 average thanks to consistent cash generation from established brands”.

The British American Tobacco share price is up 36% in a year, the dividend yield’s a thumping 6%, but the price-to-earnings ratio remains a modest 11. The FTSE 100 average is around 20.

AI doesn’t mention any risks so I’ll point out that cigarette makers are under constant regulatory scrutiny, and after a strong recent run, the shares may slow. But it may be worth considering with a long-term view, for those happy to invest in cigarette makers.

OSB Group

I asked ChatGPT to name one stock from the FTSE 250 and it picked OSB Group (LSE: OSB), which offers specialist mortgage and savings products. That surprised me, because it already tipped a stock from the financial services sector. I’m unsure this is the diversification I called for.

Like the big FTSE 100 banks, the OSB share price has had a blinder, soaring 75% in 12 months. Yet it’s still cheap with a price-to-earnings ratio of 7.7, while the trailing dividend yield’s a nifty 5.3%.

Its lending has been growing nicely and while falling base rates could squeeze net interest margins, they could also boost mortgage lending and reduce impairments. OSB has even been running a share buyback programme. This one merits further investigation.

ChatGPT has its uses but as my results show, it must be approached with caution. Investors must make their own decisions rather than rely on a robot.

The post I asked ChatGPT to name 3 brilliant passive income stocks for an ISA in 2026 and it said… appeared first on The Twelfth Magpie.