How much do you need in FTSE 100 income stocks to generate £777 a month for retirement?
UK income stocks are the unsung heroes of investment. They quietly roll up their sleeves and get on with the job of generating passive income and steady share price growth for investors who stay the course.
Iâve picked out a couple with a robust work ethic below. So whatâs so special about them?
Today, the FTSE 100 offers an average yield of around 3.25%, although itâs possible to get more by hand-picking companies. The two I’m highlighting here yield 5.65% and 5.59% respectively. Combined, they yield 5.62%.
Let’s say an investor was generating targeting income of £777 a month, which comes to £9,324 a year. Based on that 5.62% yield, they’d need £166,000. Thatâs a sizeable sum and in real life I’d invest it across more stocks than just two, to spread risk. But for the sake of argument, here goes…
Aviva is a top dividend share
The first is insurer and asset manager Aviva (LSE: AV). Its shares drifted for years while rewarding patient investors with a steady flow of dividends. Lately, loyal investors have been getting both.
The Aviva share price is up 32% over the last year and 101% over five, with all dividends on top. At times it has yielded as much as 7%, so those who reinvested their dividends have done really well.
CEO Amanda Blanc revived Aviva by simplifying operations, sharpening its strategy and driving down costs. The recent purchase of Direct Line appears to be successful.
Aviva looks like a compelling long-term holding, although nothing is ever risk-free. After such a strong run, the shares look expensive with a price-to-earnings (P/E) ratio of 27, comfortably above the FTSE 100 average of around 17.
The share price has dipped since 13 November after new performance targets fell slightly short of investor hopes. Even so, Aviva still expects to hit 2026 goals for £2bn in operating profit and £1.8bn of Solvency II fund generation a year early. It has also expanded its share buyback programme.
It’s well worth considering and the dip presents an opportunity. There will be ups and downs, so investors should stick with it for the long-term.
Admiral Group has a juicy yield
My second choice is insurer Admiral Group (LSE: ADM). Its shares have risen almost 25% over the last year, although theyâre down around 12% across the past three months. The dip followed warnings that underwriting margins in the tight UK motor market are being squeezed, which could put some pressure on profits. Households remain stretched generally, adding to the challenge.
With a P/E of 14.6, Admiral looks decent value and again, the recent dip may offer a tempting entry point. I wouldn’t call it a consistent dividend payer, the board has cut payouts three times in the last decade, sometimes quite steeply. But generous increases in the good times compensiate.
In 2024, the full-year dividend was hiked 86% to 192p per share. Admiral’s worth considering for the long-term, though it will always come with spells of volatility.
Two stocks canât deliver a fully diversified income portfolio, but they offer a useful starting point. Anyone wanting more income can find even higher yields across the FTSE 100. But theyâre well worth examining as part of a rounded approach to retirement planning.
The post How much do you need in FTSE 100 income stocks to generate £777 a month for retirement? appeared first on The Motley Fool UK.
Should you invest £1,000 in Aviva plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool 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 Aviva plc made the list?
More reading
- How many Aviva shares must I buy for a £1,000 yearly passive income?
- How much passive income can you earn with £20,000?
- Could the Autumn Budget help shrink the UK shares valuation gap?
- I asked ChatGPT how the Autumn Budget could supercharge UK stocks â hereâs what it said
- With its 5.7% dividend yield, hereâs what I like about Aviva
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group 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.
