Stock market

5.5% yield! A fantastic FTSE 100 stock that I would buy to target lifetime passive income.

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I believe in investing. FTSE 100 Shares are one of the best ways to create passive income.

Profits are never guaranteed. As we’ve seen during economic crashes — and more recently during pandemics — shareholder payouts can drop with little or no warning.

But over the long term, the companies on the UK’s premier share index are still reliable and profitable income providers. This is why I myself have built a diversified portfolio of Footsie stocks using my own tax-efficient stocks and shares ISA.

Dividend income can help investors like me grow their wealth substantially over time. By using this to buy more shares, I create a continuous cycle of reinvestment, which in turn exponentially increases both the number of shares I hold and the total profit I receive.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content in this article is provided for informational purposes only. It is not intended to be, nor does it constitute, any form of tax advice. Readers are responsible for doing their own due diligence and seeking professional advice before making any investment decisions.

What I look for.

Buying high-yielding dividend stocks can help me on my journey. But that’s not all I’m looking for. When investing for passive income, I also look for companies that have a good chance of increasing shareholder payouts over time.

So I look for UK shares that have several of the following characteristics:

  • Impressive dividend delivery record
  • Established positions in emerging markets.
  • Different income streams
  • Strong balance sheets, including low debt and strong cash flow
  • Economic moats (also called competitive advantages)
  • Defensive actions that ensure long-term earnings stability.

With that in mind, here’s a top FTSE 100 stock I’d buy next time.

A profitable hero

Investing in renewable energy reserves can be an excellent investment strategy as the demand for green energy increases. An option for me would be to buy shares in a company that owns wind or solar energy assets.

Another is to buy shares in businesses that allow renewable energy companies to transfer their power to households and businesses. To this end, I think I would make a position National Grid (LSE:NG.) could be extremely profitable.

The costs of building its assets to take advantage of the clean energy revolution are high. Indeed, National Grid plans to spend £58bn over the coming years to decarbonise the country’s electricity network.

Some are concerned about the impact of these costs on revenue in the short to medium term. But the project – which will involve connecting an additional 21GW of offshore wind – also has the potential to drive both profitability and profits through the roof once completed.

5%+ dividend yield

There are other reasons why I like National Grid as a dividend stock. It has a monopoly over the operation and maintenance of the country’s power network, and its services are in constant demand regardless of economic conditions.

These, in turn, provide earnings stability that most UK shares can only dream of.

Thanks to this, National Grid has an impressive record of consistent dividend growth. And on a positive note, City analysts expect this trend to continue, resulting in a hefty dividend of 5.3% and 5.5% for this year and next.

When it comes to dividend investing, I think this FTSE 100 share is hard to beat.


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