Want to know how you could achieve a huge passive income with dividend stocks? Here are five steps to get started on your journey.

Trim tax

The first task is to reduce or eliminate taxes completely. Over time, the contributions you make to HMRC can significantly drain your wealth.

I love the idea of the Stocks and Shares ISA for this reason, and hold one myself. With these, no tax is paid on capital gains or dividends. The result is more cash in your pocket to boost compound gains.

Then when you’re ready to start drawing the dividends you receive, no tax is due on those either.

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.

Diversify for the win

The next step is to build a diversified portfolio. We’re talking about companies from different stock markets and which have exposure to a variety of regions and industries.

This can be achieved by buying individual shares. You can also utilise this strategy by taking positions in investment trusts and exchange-traded funds (ETFs).

A diversified approach can help you reduce risk while still targeting incredible returns. If you’d invested in a FTSE 100 ETF a decade ago, for instance, you’d have achieved an average annual return above 9%.

A top dividend opportunity?

A mixed portfolio should also comprise different categories of shares, namely:

• Growth shares for long-term capital appreciation.
• Value shares that can rise in value and protect you from market volatility.
• Dividend shares for solid returns across the economic cycle.

Let me tell you about Prudential (LSE:PRU), a share I hold in my ISA for passive income. Dividends are never guaranteed, and especially during economic downturns. In this regard, ‘The Pru’s’ track record of 22 dividend increases in 23 years deserves serious attention from investors.

Prudential’s confident it can keep this record going, pledging to keep raising payouts by at least 10% through to 2027. I’m hopeful it will too, given the firm’s strong balance sheet that’s also supporting share buybacks.

Prudential’s a market leader in life insurance, health insurance and asset management, and is focused on Asian regions where demand’s booming. It’s experiencing some problems in China right now, which could put a drag on profits near term. But this isn’t expected to derail its dividend growth story, and City analysts agree.

Consider high-yield shares

With a diversified portfolio like this, I think an average annual return of 9% is very achievable. This is important, as it could turn even a modest monthly investment like £300 a month into an impressive £549,223 after 30 years.

The question is, what kind of passive income could an ISA this size deliver? The answer is £38,446 tax free, if invested in 7%-yielding dividend shares.

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

Royston Wild owns shares in Prudential.

The post 4 steps to building a £38,456 retirement income with ISA shares appeared first on The Twelfth Magpie.

The business is delivering strong signs of sharply rising earnings momentum across its core Asian markets. And its improving cash generation adds further support to an upwards re-rating.

So what sort of higher valuation are we looking at?

What are the growth drivers for a higher price?

A higher valuation can only be justified if the growth engine is firing strongly. A risk to this for Prudential is any slowdown in key Asian markets, particularly Hong Kong or mainland China. Another is any sustained rise in healthcare costs, which could also squeeze its margins.

That said, analysts forecast its earnings will grow by an average of 20.9% a year over the medium term at least. The projections look an underestimate to me, given the firm’s last set of major results (full-year 2025 released on 18 March 2026).

These saw IFRS profit after tax soar 69% year on year to $4.119bn (£3.07bn). This illustrated the benefit of rising productivity, stronger bancassurance margins and sustained demand across Greater China and Asia.

New business profit jumped 12% to $2.782bn, reflecting Prudential’s multi‑market distribution model and the continued expansion of higher‑margin health and protection products.

And operating free surplus cash flow generated from in‑force insurance and asset management grew 15% to $3.059bn. The rise underlined improved claims management and disciplined cost control.

What sort of valuation is ‘fair’ here?

Fair value for a stock reflects an underlying business’s key fundamentals. This is completely different from price, which is just a transitory marker of wherever the market decides to trade at any point.

It is important to know where a share’s fair value lies because historically, stock prices tend to converge to this value over time. And every savvy professional investor I have known uses discounted cash flow (DCF) analysis to ascertain where any stock’s fair value is.

It achieves this by projecting a business’s future cash flows and discounting them back to today. Where those projections become less certain, the discount rate applied increases.

Because different analysts’ assumptions in the modelling may differ, the outcomes can be more bullish or more bearish than others. Based on my own framework — including a 7.4% discount rate — Prudential looks 46% undervalued at its current £11.29 price.

That implies a fair value of £20.91, nearly double the price today. So, if markets continue drifting toward fair value and the DCF modelling holds good, this could be a terrific potential buying opportunity now.

My investment view

Prudential is delivering some of the strongest earnings momentum in the FTSE. IFRS profit, new business profit and operating free‑surplus cash flow are all rising at double‑digit rates.

And its core Asian markets continue driving higher‑margin growth, supported by expanding distribution and sustained demand across health and protection.

Yet despite this, the shares still trade at a massive discount to fair value by my reckoning. That huge disconnect makes them well worthy of investor attention, in my view.

I already have several holdings in the same sector, so will not buy another. Instead, I am looking at similarly deeply undervalued stocks, but with high yields as well, in other sectors.

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

Simon Watkins does not hold any positions in the companies mentioned.

The post How much value is left in Prudential shares at around £11 after a 37% rise this year? appeared first on The Twelfth Magpie.

For those with Stocks and Shares ISAs, this opportunity comes at a good time as many investors will be looking to top up their accounts with fresh capital in the next few weeks before the 5 April deadline. So, which are some good shares to consider?

Projected to rise nearly 30%

Scanning the FTSE 100, one name that looks attractive to me today is Prudential (LSE: PRU). It’s a well-established insurance company that’s focused on the high-growth Asian and African markets.

It’s currently trading for around 1,090p, down from around 1,230p in February. At the current share price, the stock’s price-to-earnings (P/E) ratio is 12.1, falling to 10.5 using next year’s earnings forecast.

These earnings multiples are below market averages. Note that the average analyst price target for the stock is £13.83 – about 27% above the current share price.

Earlier this week, Prudential posted its results for 2025 and they were strong. For the year, new business profit grew 12% per cent to $2.8bn.

On the back of this performance, the company hiked its dividend by 15% (signalling management is confident about the future). It also announced some sizeable share buybacks.

In the results, CEO Anil Wadhwani said that structural demand for its products in Asia and Africa continues to rise due to increasing protection, retirement, and wealth needs of consumers. He added that the company is carrying the momentum from 2025 into 2026 and that it’s confident of generating double-digit growth this year.

It’s worth pointing out that a major economic slowdown across Asia is a risk with this stock. This could lead to a temporary dip in demand for the company’s financial products.

Taking a five-year view though (our preferred time horizon here at The Motley Fool), I see a lot of potential. I think this stock is worth a closer look right now while it’s down.

A dividend yield of 7.6%

Now, one downside to Prudential is that its dividend yield isn’t very high. Currently, it’s only about 2%.

An alternative option for those seeking higher levels of income is M&G. This is a savings and investment company that was split off from Prudential back in 2019.

It currently sports a yield of about 7.6% (one of the highest yields in the FTSE 100). It’s also very cheap though – the forward-looking P/E ratio is around 10 right now.

Of course, this stock has its own risks. A major stock market meltdown is one – this would hurt its profits.

Again though, taking a long-term view, I see potential for attractive returns. I think it’s worth considering at current levels.

The post As the ISA deadline approaches, UK investors have the opportunity to buy cheap shares appeared first on The Twelfth Magpie.

Want to see what I’ve found? Read on to find two FTSE heroes I think could be too cheap for investors to ignore.

Home comforts

Risks are growing for Berkeley Group (LSE:BKG) as conflict in the Middle East intensifies. Leaping oil prices are fuelling inflationary pressures, and with them hopes of interest rate cuts. A much-expected reduction in Bank of England (BoE) lending rates this month may now have been kicked into the long grass.

Higher interest rates are extremely damaging to home sales by crimping buyer affordability. But could this be baked into Berkeley’s cut-price valuation? I think so. The housebuilder trades on a trailing P/E ratio of 10.6 times.

Over the long term, I remain convinced this FTSE 100 stock retains excellent investment potential. This is thanks to its focus on London and the South East, where severe market undersupply is supporting prices. Real estate services specialist Savills predicts average property values in the capital will rise roughly 14% between now and 2030.

As I say, the interest rate outlook is more uncertain now than it was just a week ago. But on the whole, the broader picture regarding borrowers remains encouraging for Berkeley and its rivals. The BoE is likely to keep cutting rates to kickstart the UK economy when it can. Buyers should also being helped by a fierce mortgage rate war that’s steadily intensifying as challenger banks move in. That’s despite some mortgage rate rises last week in response to the Iran situation.

With the British population rapidly growing, I expect Berkeley’s profits to grow strongly between now and the end of the decade. I feel now represents a good time to consider buying.

What about The Pru?

Berkeley’s share price is up 9% over the last 12 months. That’s not a bad return, but Prudential (LSE:PRU) has blown it out of the water. Its share price is up a whopping 42% since last year.

Yet I believe it still offers excellent value and is worth considering. Its trailing P/E ratio is 10.7.

So why are The Pru’s shares trading so cheaply? It’s safe to say jitters remain over the health of the key Chinese recovery. Last week Beijing predicted its slowest rate of annual growth since the early 1990s for this year. The Middle East crisis hasn’t helped things either.

Investors shouldn’t write off these risks, but Prudential’s long record of resilience soothes any nerves I have as a shareholder. New business profit continues to beat expectations, up 10% in January to September according to latest financials. I’m optimistic earnings can keep rising as demographic factors drives broader financial services demand and Prudential pivots towards higher-margin products.

Given low product uptake in its emerging markets, I think Prudential has incredible growth potential over the next decade. Statista expects Asian life insurance premiums to grow 5.3% a year between now and 2035.

The post 2 insanely cheap FTSE 100 shares to consider buying today! appeared first on The Twelfth Magpie.

Crunching the numbers

A £2,000 monthly passive income works out at £24,000 a year. Under the widely used 4% rule – which suggests withdrawing 4% annually gives a portfolio a strong chance of lasting 30 years or more – that implies a target pot of roughly £600,000.

That’s the goal.

But with 24 years to go until 2050, markets won’t move in a straight line. There will almost certainly be crashes, rallies, and long periods of uneven returns along the way.

So what might that journey actually look like?

The road to £600k

To see how realistic that target might be, I projected a range of possible market journeys between now and 2050.

In this example, an investor starts with £30,000 and adds just under £250,000 over the next 24 years. Returns average around 7% annually – but not in a straight line.

I built in two 20% stock market crashes: one early on and another midway through, each followed by uneven recoveries. Crucially, contributions continue throughout, dividends are reinvested, and compounding quietly gathers momentum in the background.

Chart generated by author

The darker central band shows the most common outcomes. The lighter areas reflect more extreme results.

Here’s a key takeaway: most outcomes cluster between £550,000 and £650,000 by 2050. Even with two major downturns, the £600,000 target sits comfortably in the middle of the most likely range.

A low-cost FTSE 100 index fund is one way to approach that goal, but even a small boost in returns compounds dramatically over 24 years. One stock I’m personally keeping an eye on is Asian insurance giant Prudential (LSE: PRU).

Prudential shares are strong right now

Prudential is the kind of under-the-radar stock most investors overlook, preferring UK-focused insurers with higher dividend yields. Yet over the past year, the shares are up around 60%, reflecting strong performance and long-term growth potential.

Insurance penetration in the company’s core Asian markets remains in the low single digits, with a protection gap estimated at over $100trn – providing decades of structural growth opportunities.

Its extensive distribution network, combining highly trained agents with partnerships at leading financial institutions, gives the business a clear competitive edge.

The company’s capital-light model aims to return more than $5bn to shareholders between 2024 and 2027 through dividends, share buybacks, and potential proceeds from its India Asset Management business. Meanwhile, new business profits and operating surplus have been steadily rising, with dividends expected to grow around 10% annually over the next few years.

Given its large exposure to China, Prudential faces meaningful risks. Ongoing US-China tensions, a potential slowdown from the country’s property market challenges, and currency fluctuations could all contribute to short-term profit volatility.

This is why maintaining a diversified portfolio across shares and sectors remains essential. Over time, a disciplined approach can help build a rising passive income stream – all tax free inside a Stocks and Shares ISA.

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 post The shocking ISA balance needed for £2,000 a month passive income in 2050 appeared first on The Twelfth Magpie.

Today, I’ve been looking for other Footsie stocks that might pull the trick off again. I’ve perhaps unearthed a hidden gem in the insurance sector poised for a rip-roaring 2026.

Wind is blowing

My methodology here was simple: I wanted to find the stock with the best analyst ratings on the FTSE 100. While analysts aren’t fortune tellers, they are often a sign of which way the wind is blowing.

In this case, analysts are giving glowing ratings to insurance giant Prudential (LSE: PRU). Every single analyst covering the stock has it down as a Buy or an Outperform and it might be the most positively thought of stock on the index.

The consensus target for the next 12 months is a 21.7% increase, potentially turning £10k into around £12k. On the high end, we have a price target expecting a 44.1% increase, which would turn £10k into over £14k.

Does that sound a bit optimistic? Not if we look at the last year. The Prudential share price rose 56% in 2025, and a lot of analysts are expecting that momentum to keep going.

Impressive bumps

One possible fly in the ointment is a relatively meagre dividend yield. A chunky dividend payment means cash in the bank whatever the share price is doing. And the 1.60% yield from Prudential looks miserly indeed when compared with competitor Aviva, which is currently paying 5.65%.

While the payment as a percentage is not likely to set pulses racing, there is another way to look at this. For one, a lower yield often signals better growth prospects. A stock can command a premium if the share price has the potential to increase in value. That’s another reason to think the bullish analysts might be onto something.

But also, for long-term investors, we don’t want the highest possible yield in the first year or two of owning a stock. We want to see consistent increases over time, so we’re always earning more and more the longer we hold a stock.

Prudential’s track record looks pretty good on these terms – the company has increased the dividend for 22 years out of the last 25, managing impressive 10%-15% bumps on many of those occasions. Although the massive slash during the pandemic is worth pointing out too.

The unpredictable nature of markets and indeed the world in general means all predictions need to be taken with a rather large grain of salt. But as far as attractive-looking FTSE 100 stocks go, I think Prudential could be one for investors to consider.

The post Will this FTSE 100 stock turn £10k into £14k over the next 12 months? appeared first on The Twelfth Magpie.

Going for gold

Choppy gold prices have caused investors to reevaluate the investment potential of precious metals stocks. Bullion values are still up 73% on a 12-month basis. But they could drop sharply again if profit taking resumes, driving gold shares lower again.

On balance, though, I’m optimistic the yellow metal’s multi-year bull run remains intact. As a result, I think miners like Fresnillo (LSE:FRES) will keep on climbing.

Research late last week from the World Gold Council (WGC) have fed my optimism. It showed global gold-backed exchange-traded funds (ETFs) attract inflows of $19bn in January, the highest monthly total in history.

While impressive, that wasn’t my key takeaway. I was more encouraged by the WGC’s comments that “even with the recent price decline, all regions except Europe saw net inflows on both 30 January and 2 February, as investors appeared to take advantage of the dip to add exposure to gold.”

This reflects the strength of underlying demand for the yellow metal. I’m expecting key drivers like a declining US dollar, falling interest rates, rising geopolitical tensions, and growing worries over an AI bubble to keep feeding demand for the safe-haven asset.

Investing in mining stocks over gold itself carries higher risk, reflecting the unpredictable nature of metal excavation. But it can also lead to far greater rewards — Fresnillo’s share price is up 387% over the last year, comfortably outpacing the gold price.

Yet Fresnillo shares still look cheap at £36.94. City analysts think earnings will soar 75% in 2026, leaving it trading on a price-to-earnings (PEG) ratio of 0.2. Any reading below one indicates a share trading below value. I think it’s a top share to consider following recent price volatility.

Another FTSE 100 bargain

Prudential (LSE:PRU) shares have risen even more sharply than the FTSE 100 in recent times. Up 73% since this time last year, they’ve comfortably outpaced the broader Footsie‘s 18% rise.

Yet years of underperformance prior to 2025 mean the life insurer still looks very cheap on paper. City analysts think The Pru’s earnings will soar 14% this calendar year. This leave it on a forward PEG ratio of 0.9.

That’s not all — a predicted 15% bottom-line rise in 15% in 2027 leaves a PEG of 0.8 for next year.

Why is Prudential’s share price surging right now, though? It essentially comes down to improving investor sentiment towards Asian economies, which are now beginning to pick up after a post-Covid slump.

Prudential’s a major player across Asia Pacific, and has a presence in the region’s economic hotspots like China, Hong Kong and Singapore. It faces significant competitive pressures, but the opportunities for it to supercharge profits are huge

Deloitte predicts Asia’s life insurance market to grow a healthy 5.3% a year to 2053, driven by exploding wealth levels and population sizes. Latest financials showed Prudential grew new business profits 13% in Q3. I expect the FTSE firm to keep delivering, helped by its strong brand and operational expansion.

The post 2 dirt-cheap FTSE 100 shares to consider this week! 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.

What this chart really shows

The chart below isn’t a retirement countdown. It’s a spending-power test. What matters is how much income an ISA can provide once it starts working for you.

With cautious assumptions, a £500,000 ISA could generate roughly £30,000 a year in passive income. On paper, this is simply double the income of a £250,000 ISA, but in practice, it can feel like a very different proposition.

Looking beyond the ‘line’

At £250,000, most investors are still locked into the line. The income helps, but it rarely reshapes life choices. Work continues to do the heavy lifting.

At £500,000, the line starts to bend. The income is no longer marginal. It can cover a large share of essential spending, introducing optionality well before full retirement. That might mean reducing hours, changing roles, taking breaks, or easing financial pressure even before withdrawals begin.

That’s why the chart matters less than it looks. It’s not a rigid plan to follow, but proof of concept – showing when an ISA stops being a supplement and starts providing genuine financial freedom.

Growth mindset

There are two realistic ways an investor reaches a £500,000 ISA. Either capital does more of the work, through growth-oriented investments. Or time does, by starting earlier and allowing compounding to do the heavy lifting.

If you’re relying on capital, the question becomes: which stocks can help your ISA grow steadily over the years? That’s where companies like Prudential (LSE: PRU) come into play – businesses with structural growth potential and a proven track record, positioned to support long-term ISA growth.

The Asian insurer isn’t a flashy tech growth story, but its opportunities are tangible. Investors are beginning to take notice, with the stock up 75% over the past year.

Across Asia, the total addressable market for life insurance premiums is expected to double to $1.6trn by 2033. With insurance penetration still in low single digits in key markets like China and India, and a rapidly expanding middle class, the potential for growth is enormous.

Of course, no investment is risk-free. The insurer faces challenges, including exposure to China’s recent property bubble collapse, interest rate fluctuations, and regulatory uncertainty, which could affect growth and returns. A slowdown in these markets could impact profits, and geopolitical tensions or policy changes also need to be carefully considered.

Bottom line

The business is in the midst of a multi-year transformation, showing clear momentum in earnings and cash generation. While dividends remain modest, the real appeal for a growth-focused ISA is the compounding potential of retained profits as Prudential captures this massive market opportunity.

I recently added to my holdings. Its combination of structural growth potential, deep expertise in Asian markets, and universal brand recognition were the key drivers behind my decision.

No single stock will carry an ISA to £500,000 on its own, but Prudential is a company worth considering for investors looking to let capital do some of the heavy lifting.

The post How much passive income could a £500,000 ISA really deliver? 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.

Crunching the numbers

So how much would I need invested in an ISA to earn £2,317 a month? That’s equates to £27,804 a year – roughly 75% of the average UK salary – enough to meaningfully replace part of a full-time income.

Using the 4% rule, which already accounts for inflation, a portfolio would need to be worth around £700,000 in today’s money to generate this income.

Put another way, this is the purchasing power you’d want at age 65; you don’t need £700k sitting in your account today. Instead, disciplined investing over the years builds a portfolio that grows to this target in real terms, adjusting naturally for inflation along the way.

The chart below shows how tiered contributions totalling £272,500 over a 25-year investing horizon (age 40 to 64) could build an ISA portfolio under three different annual return assumptions.

• 4%: a cash-like baseline where progress is steady, but even disciplined contributions fall well short of the £700,000 target in real terms.

• 6%: a balanced long-term return that builds a substantial pot, but still leaves a noticeable gap to fully replace 75% of the average salary.

• 8%: a stronger equity return where compounding accelerates in later years, allowing the portfolio to reach the £700,000 target by age 64.

Chart generated by author

Growth stock

Many investors assume that building passive income means owning high-yield shares from day one. I don’t take that view. During the contribution phase, long-term growth can be far more powerful – especially when dividends are reinvested.

That’s why Prudential (LSE: PRU) earns a place in my Stocks and Shares ISA. Its current dividend yield of around 2% isn’t the attraction. Instead, I see it as a compounding growth opportunity across in Asian markets, where insurance penetration remains in the low single digits. The region’s protection gap is estimated at well over $100trn, providing a structural backdrop for decades of growth.

In 2025, the shares are up around 75%, making the company the strongest performer among its FTSE 100 insurance peers. Even after that rally, I’d argue the stock remains underappreciated, partly because lingering concerns around China continue to dominate the narrative.

The insurer’s capital-light model gives it significant flexibility. Between 2024 and 2027, the group expects to return more than $5bn to shareholders, combining steady dividend growth with a sizeable share buyback programme. More broadly, Asia’s expanding middle class is driving rising demand for financial protection, savings, and health products – services many Western investors take for granted.

The main risks are regulatory or policy changes in China, currency swings, and uneven economic growth across Asia, which could cause short-term volatility. Nevertheless, in my opinion, these factors don’t alter the long-term growth thesis.

Bottom line

Reaching a £700k target over a 25-year investing horizon requires not only discipline and patience, but also a focus on growth opportunities that the market may be overlooking. Prudential is an example that illustrates this approach, which is why it features in my Stocks and Shares ISA – though it’s far from the only stock I have my eye on.

The post How much would I need invested in an ISA to earn £2,317 a month in passive income? appeared first on The Twelfth Magpie.

What time really buys

The chart tells the story better than any spreadsheet ever could. Two investors. The same total contributions. Very different starting points. One starts early and builds gradually. The other starts much later and saves hard. By retirement, the gap in portfolio size isn’t as dramatic as many might expect. But how they get there is everything.

Chart generated by author

The £20,000 income shown is inflation-adjusted. That matters. It’s why the earlier starter appears to withdraw more at the outset – prices have had decades to rise quietly in the background. The later starter begins withdrawals sooner, so the initial income looks lower in today’s terms.

Returns are also assumed to fall in retirement. Not because markets suddenly stop working, but because most people naturally reduce risk once their salary ends. Growth gives way to preservation. It’s a subtle shift, but over long retirements, it really adds up.

Optionality

Where time really earns its keep is before retirement. Starting earlier creates choices during your working life: the freedom to pause contributions, take career breaks, ride out market crashes, or simply ease off when life gets in the way.

Early contributions do most of the heavy lifting. Later ones can still be powerful – but they’re far less forgiving.

The late-starter route can absolutely work. But it demands consistency, higher savings rates, and leaves much less room for error if plans change.

This isn’t about a right or wrong approach. It’s about understanding what time actually buys you. The chart doesn’t just show growth – it shows how starting earlier turns flexibility itself into an asset.

Under the radar

Many investors assume the only way to build passive income is by owning high-yielding shares. I don’t take that view.

You see, I didn’t buy Asian insurance giant Prudential (LSE: PRU) for its headline yield – currently around 2%. Instead I bought it for the long-term compounding opportunity across underinsured Asian markets. Insurance penetration remains in the low-single-digits, while the region’s protection gap is estimated at more than $100trn. That’s a powerful backdrop for growth.

In 2025, the shares are up 75%, making them the best performer among its FTSE 100 insurance peers. Even so, I’d argue the stock still sits under the radar for many investors.

China exposure does introduce volatility, and policy risk shouldn’t be ignored. The bursting of the property bubble has clearly dented the country’s growth story. But much of that uncertainty appears to be reflected in the valuation, in my opinion.

What really appeals to me is the capital flexibility. Between 2024 and 2027, Prudential expects to return more than $5bn to shareholders, combining a 10% annual increase in the dividend with a $2bn share buyback programme.

With the Chinese government actively encouraging stock market participation, Prudential looks well placed to benefit. Strong distribution, a trusted brand, and deep expertise across Asian markets are why it earns a place in my Stocks and Shares ISA. It’s not a pure income play today – but it gives me valuable optionality for the future.

The post How much would I need in an ISA to earn £20,000 a year in passive income? appeared first on The Twelfth Magpie.