Most UK dividend-paying companies dish out passive income to their shareholders twice a year. However, a few pay four times a year (quarterly), including some in the FTSE 100.
As such, it’s perfectly possible to aim for a high-quality Stocks and Shares ISA portfolio that generates income every month of the year.
While no individual dividend is bullet-proof, here’s a simple five-stock FTSE 100 portfolio that could, in theory, pay dividends all year round.
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A complete calendar portfolio
Without further ado, the stocks are Legal & General, HSBC, LondonMetric Property (LSE:LMP), Shell, and British American Tobacco.
Legal & General pays dividends twice a year (June and September). Meanwhile, the other four distribute quarterly, with varying timescales.
The result is a complete calendar portfolio!
| Payment schedule | |
| LondonMetric Property | January, April, July, October |
| British American Tobacco | February, May, August, November |
| Shell | March, June, September, December |
| HSBC | April, June, September, December |
| Legal & General | June, September |
British American Tobacco is the owner of cigarette brands Lucky Strike, Pall Mall, and Rothmans, which generate substantial profits that support generous shareholder distributions.
HSBC is capturing growth opportunities across Asia, particularly in wealth management, while Legal & General has nearly 200 years of experience in insurance and several decades in asset management.
LondonMetric is a real estate investment trust (REIT) with a large portfolio of properties focused on the logistics, healthcare, and entertainment sectors. It boasts an impressive 98.1% occupancy rate.
Finally, Shell should provide a hedge against rising fuel/energy costs, which often negatively impact the rest of the economy.
A good balance
As the table above shows, June and September would be dividend mega-months, with three separate payments then. And Shell and HSBC would get a couple of handy ones in just before Christmas.
What I like here is that the stocks offer a decent level of diversification. This is important because each firm has its own individual risks.
For example, British American Tobacco is facing falling cigarette volumes worldwide, and tobacco stocks are unethical to some investors.
Meanwhile, HSBC and Legal & General might struggle during a severe economic downturn, and Shell’s profits are at the mercy of volatile energy prices.
Stepping back, though, I like the mix of stocks here, particularly as they all offer market-beating dividend yields. If an equal amount was invested in each, the forecast portfolio yield would be roughly 5.8%.
So, a £20k ISA made up of these stocks would generate about £1,160 in annual passive income.
This one looks interesting
For the record, I own two of these (Legal & General and HSBC) and am seriously considering buying shares of LondonMetric this month.
Down nearly 30% since the start of 2022, the REIT’s share price continues to languish due to higher interest rates. With inflation not tamed entirely yet, there’s an outside chance that rates start creeping back up, which could hit the value of LondonMetric’s assets.
However, most of the company’s borrowing is at fixed rates, while a super-high occupancy rate of 98.1% reflects its focus on resilient, growing areas such as e-commerce warehouses. Top occupiers include private hospital Ramsay Health Care, Travelodge, and Primark.
The 6.4% forecast yield looks attractive, with management confident of making 2025 its eleventh consecutive year of dividend hikes.
Taking a long-term view here, I think LondonMetric could provide solid share price and income returns, making it one to think about in February.
