How I’d earn passive income in 2021 for £100 a month

first_img I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. “This Stock Could Be Like Buying Amazon in 1997” Simply click below to discover how you can take advantage of this. How I’d earn passive income in 2021 for £100 a month Our 6 ‘Best Buys Now’ Shares Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Enter Your Email Address Christopher Ruane | Tuesday, 5th January, 2021 center_img christopherruane owns shares of British American Tobacco, Imperial Brands, and Legal & General Group. The Motley Fool UK has recommended GlaxoSmithKline, Imperial Brands, and Unilever. 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, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. See all posts by Christopher Ruane Image source: Getty Images Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. As 2021 gets under way, many people are looking into how to earn passive income in the coming year. Passive income is exactly what it sounds like: money one receives without having to work for it. Landlords, investors and songwriters will all be receiving passive income in 2020. Here’s how I would join them by putting aside just £100 a month.For passive income I’d focus on solid namesStarting out with just £100 each month, it can be tempting to make investment choices that claim unusually high returns. I think that’s often a mistake. With limited capital, it’s vital to focus on capital retention. Investing it into a tech name that has soared to dizzy valuations and hoping it keeps increasing is too speculative for my taste.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Instead, I’d focus on companies that are well-established, sizeable, have consistent revenues and whose business prospects look stable. I would then feel more comfortable that the shares would have less risk of plummeting in price.Examples of such blue-chip choices include consumer goods giants Reckitt Benckiser and Unilever. I would also look into pharma names such as GlaxoSmithKline and AstraZeneca. Tobacco companies British American Tobacco and Imperial Brands are also interesting choices, along with general insurers like Aviva and Legal & General.However, a reliable business model on a large scale doesn’t necessarily equate to passive income. For example, last year Aviva scrapped its final dividend and Imperial Brands reduced its payouts.Similarly, companies like AstraZeneca and Reckitt have share prices that equate to a dividend yield below 3%. That isn’t especially attractive to me as an income hunter, despite the companies’ quality. That’s a common investment theme: investors bid up high-quality companies so their dividend yields are diluted. In my disciplined hunt for passive income, I’d therefore rule out many high-quality companies.I’d go for high-yielding dividend raisersAmong the companies that survived this initial screening, I’d now look at the potential for passive income each offers.One element of this is yield. Which companies have a high payout relative to their current price? For example, British American yields over 7% and Legal & General yields over 6%.But a high yield now doesn’t mean there will be a high yield in future. In fact, a high yield can often suggest that the market is pricing-in a future dividend cut. So I would go through the additional screening step of looking to see whether the dividend is covered by earnings. I’d also explore whether the company has a history of raising it.Legal & General has raised its dividend in most years, but there was a cut during the last financial crisis. By contrast, British American has raised its dividend each year for over 20 years. Earnings have comfortably covered the dividend in recent years. So if I was looking for passive income, I would begin by investing £100 a month into its shares.With the current yield for those shares, I’d expect my monthly savings in year one to generate around £90 a year in passive income. As my portfolio grew through steady saving, I could diversify into other shares. Whatever I chose, I’d still focus on getting the right information and knowledge to follow my disciplined selection process.last_img

Leave a Reply

Your email address will not be published. Required fields are marked *