8% yield! How to target a £1,600 second income with these 7 ISA stocks
Want to maximise your chances of making a strong second income? Then think about buying dividend shares in a Stocks and Shares ISA. With protection from taxes, every single penny someone earns in dividend income is theirs to reinvest, spend, or both.
Stock markets have rallied in recent times, pulling down dividend yields. But the FTSE 100 and FTSE 250 indexes remain packed with high-yield heroes that could deliver an enormous passive income in 2026 and beyond.
Have £20,000 sitting in an ISA? Here’s how you could target an income of £1,600 this year alone.
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.
Seven of the best
One of the keys of successful dividend investing is to build a diversified portfolio. The aim is to hold shares spanning different industries, sub-sectors and regions. With this strategy, a portfolio can still deliver robust dividend income, even if one or two companies hit trouble.
With a large number of high-yield stocks to choose from, investors can spread their risk without sacrificing wealth. Here’s an example of a seven-share portfolio that could deliver a large and resilient income stream:
| Dividend stock | Industry | Core region | Forward dividend yield |
|---|---|---|---|
| Legal & General | Financial services | UK | 8.2% |
| Greencoat Renewables | Renewable energy | Ireland | 9.8% |
| Supermarket Income REIT | Real estate investment trusts (REITs) | UK | 7.3% |
| Global X SuperDividend UCITS ETF | Exchange-traded fund (ETF) | Global | 10.1% |
| Admiral | Insurance | UK | 6.3% |
| Chelverton UK Dividend Trust (LSE:SDV) | Investment trusts | UK | 8.3% |
| Verizon Communications | Telecommunications | US | 6.1% |
With an average dividend yield of 8%, a £20k ISA investment spread equally across this portfolio would provide an £1,600 second income over 12 months.
You might be thinking that seven stocks isn’t representative of a well-diversified portfolio. This is where the inclusion of the Global X SuperDividend ETF and Chelverton UK Dividend Trust come in.
Combined, they hold shares in 168 different global and UK dividend shares. Pooled investments like this can provide a ‘cheat code’ for investors to build a mixed portfolio with relatively little effort, and much less cost than by purchasing dozens of individual stocks.
A top income trust
The Chelverton UK Dividend Trust is (in my view) one of the best investment trusts to consider for income. And it’s not just because, at 8.3%, its forward dividend yield is almost three times the FTSE 100 average.
Annual dividends here have risen for each of the last 14 years. This is thanks to the trust’s excellent strength in depth — some of the many sectors it invests in include media (ITV), logistics (Smiths News), insurance (Chesnara), retail (Wickes), and real estate investment trusts (Primary Health Properties).
Chelverton’s focus on mid- and small-cap companies comes with higher risk and reward than prioritising FTSE 100 shares. Smaller firms with more limited financial resources can lead to greater dividend volatility, and especially during economic downturns. However, it does provide the trust with that enormous yield.
One final thing: by concentrating on UK shares, the trust plugs investors into one of the most dividend-focused markets on the planet. As part of a diversified ISA, trusts like this can help deliver a large, dependable second income over time.
The post 8% yield! How to target a £1,600 second income with these 7 ISA stocks appeared first on The Motley Fool UK.
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Royston Wild has positions in Legal & General Group Plc and Primary Health Properties Plc. The Motley Fool UK has recommended Admiral Group Plc, Chesnara Plc, ITV, and Primary Health Properties 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.
