How much do I need in a Stocks and Shares ISA to earn a £100 monthly income?

Dividend shares don’t offer fireworks, but they can provide durable passive income. And the FTSE 100 can be a great place for investors to look for potential opportunities.

A good example is LondonMetric Property (LSE:LMP). A 6% dividend can turn £20,000 – the annual Stocks and Shares ISA limit– into a £100 monthly income.

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REITs 

LondonMetric Property is a real estate investment trust (REIT), companies that own and lease properties to tenants, while returning their income to shareholders.

I think they’re a great asset class for a lot of investors. For existing landlords, REITs offer the potential for steady rental income without the work of property management.

For renters paying someone else’s mortgage, they offer the chance to be on the other side of the fence. They can own a real estate portfolio and collect their own rental income.

There are all kinds of different REITs in various countries and sectors. And some of the UK-listed ones look like really interesting opportunities for long-term investors.

Stocks and Shares ISA

Despite the FTSE 100’s recent outperformance, the UK doesn’t have the strongest reputation with investors. But a Stocks and Shares ISA is a hugely valuable asset. Basic rate taxpayers (like me) pay 8.75% tax on annual dividends over £500. So a 6% yield means the amount they have to invest to earn £100 a month is £21,021.

With a Stocks and Shares ISA though, investors don’t have to pay dividend tax at all. And that means earning a 6% return on £20,000 is enough to generate a £100 monthly income.

That’s the advantage of an ISA – investors get the same stock, the same company, and the same risks, but better returns as a result of lower taxes. But investors still have to find the right stock.

A stock to consider

LondonMetric Property’s urban logistics assets make up 54% of its portfolio. These are located in key areas and benefit from strong demand, which means they generate above-average rents.

Exposure to a growing industry can attract higher competition. And while there are space limitations, that’s a risk that doesn’t show up with less sought-after properties, such as offices.

The company though, has some advantages over competitors. One is that its scale puts it in a strong position to grow through acquisitions, which it has done very well in recent years.

A 6% dividend yield is relatively high, but it’s lower than a lot of other UK REITs. And that means using its stock as currency to do deals often gives the firm an instant earnings boost.

Passive income

I think investors looking for passive income opportunities should keep REITs on their radars. At their best, they can be some of the stock market’s most reliable sources of cash.

LondonMetric Property’s 6% dividend yield is high enough to be eye-catching, but relatively low for the industry. And that gives it an advantage when it comes to future growth.

At today’s prices, I think it’s one for dividend investors to check out. In a Stocks and Shares ISA, £20,000 is enough to target a £100 monthly income.

The post How much do I need in a Stocks and Shares ISA to earn a £100 monthly income? appeared first on The Motley Fool UK.

More reading

• How much do you need in an ISA to generate a second income of £2,700 a month in 2050?
• Owning 2,844 shares of this FTSE 100 firm could pay £351 in annual second income
• How to start building £15,204 lifetime passive income with just £50 a week
• £1,000 buys 481 shares in this fantastic FTSE 100 REIT
• Here’s a 5-stock portfolio that pays passive income every single month

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended LondonMetric Property 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, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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