A second income can really come in handy. Especially if you don’t have to lift a finger to earn it. And it can be done, by investing in a Stocks and Shares ISA.

Growing numbers of Britons have second jobs or side hustles. But it’s possible to get a secondary source of income, and with a lot less effort, by investing in a spread of FTSE 100 shares. UK blue-chip stocks pay some of the most generous dividends in the world. It’s passive income, and it can really build up over time.

How can I use stocks to boost my spending power?

Time is the key word here. While you can generate dividend income almost from day one, by purchasing a top dividend income stock, it takes time to grow into something really worth having.

Let’s say someone’s aiming for an income of £14,713 a year. I’ve chosen that number, because it’s the average wage from a UK part-time job. How much investors need in their ISA to earn it depends on the overall yield.

While the FTSE 100 has an average yield of 3.3%, it’s possible to get as much as 5%, 6% or 7% from a spread of more generous dividend stocks. The higher the yield, the less money you need to hit that second income target.

• 5% – £294,260
• 6% – £245,217
• 7% – £210,186

So how long does it take to generate the middle of those three figures – £245,217? Let’s assume someone has a timeline of 30 years. Which may seem lengthy, but that’s how investment wealth is built. Slowly, over time.

If they tuck away £175 a month, and their portfolio grew at an average rate of 8% a year, they’d have £256,926. Ideally they should invest more, as inflation will erode its real value over time. But where to start?

Is this dividend stock worth buying today?

I’ve just added this top income stock to my own portfolio: NatWest Group (LSE NWG). Its forecast to yield a stunning 6.4% this year. The forward yield for 2027 is nearly 7.2%.

The NatWest share price has had a stunning run. It’s up 198% over the last five years, with dividends on top. However, the shares have been volatile lately, as investors fret over both the Iran war and political shenanigans at Westminster.

On 1 May, NatWest reported a healthy 12% increase in first quarter profits and raised its income guidance for 2026. That wasn’t enough to calm investors. Markets are worried about threats such as loan impairments, windfall taxes, rising mortgage rates and the potential for a recession or even stock market crash.

We live in uncertain times, but I think the risks here are more than offset by NatWest’s incredibly low forward price-to-earnings ratio of just 7.9. I think it’s one of the most compelling income and growth opportunities on the FTSE 100 right now. I’ll be watching the stock carefully to see how it weathers current storms, while reinvesting every dividend I receive to build up my stake over time, and generate even more income one day.

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• How much does an ISA investor need to target a £767 monthly income?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The Legal & General (LSE: LGEN) dividend yield is a thing of beauty, but the share price? Not so much.

Today, the blue-chip insurer and asset manager boasts a magnificent trailing dividend yield of 8.8%, the highest on the entire FTSE 100 index. It’s not hard to see why it’s one of the UK’s most bought companies. It certainly isn’t due to its stock performance. Over the last 12 months, Legal & General shares have climbed just 2%. Over five years, they’re down 11%. As a benchmark, the FTSE 100 climbed more than 45% over the same. That’s serious under-delivery. In fact, it gets worse than that.

Why won’t this FTSE 100 stock grow?

Today, Legal & General shares trade at similar levels to December 2014. It’s suffered a lost decade and then some. Investors will have bagged heaps of dividends but it does beg the obvious question. Does the sky-high passive income compensate for the lost share price potential?

There’s one thing worth pointing out. Every time a company pays a dividend, the stock falls to reflect the value coming out of the business. Legal & General goes ex-dividend twice a year. Each time, the shares fall around 4% on the day.

So to a degree, income comes out of growth. But it’s possible to get both. Just look at FTSE 100 rival Aviva. Today, it has a superb trailing yield of 6.4% (and it’s been higher). Yet the Aviva share price has also managed to grow 55% over the last five years.

Interestingly, Aviva shares struggled for years. I know that because I stupidly sold them, just before they took it off. CEO Amanda Blanc has presided over a remarkable turnaround since 2020, streamlining and tightening the business. A quick comparison of the two companies’ full-year operating profits show why Aviva is winning.

Aviva’s profits started at a lower level, and have risen to a much higher one. Legal & General’s actually fell in 2024, and barely recovered in 2025. Clearly, it’s not an accident that Legal & General’s shares are idling. But nor is it inevitable.

Can it play catch-up with Aviva?

CEO António Simões is looking to boost growth by unifying its asset management divisions, boosting private market capabilities and scaling the pension risk transfer business. He’s also looking to expand in the US, Canada, Netherlands and Asia, while rewarding investors with a record £1.2bn share buyback. The board plans to return more than £5bn to shareholders between 2025 and 2027. Dividend growth will slow to just 2% though.

The key question now is how well management executes that strategy. I hold Legal & General in my SIPP and will be watching its progress closely, while reinvesting every dividend to build up my stake. Personally, I think it’s worth holding for the income, but I’m hoping it has the potential to deliver some growth and generate an even higher total return.

The post The Legal & General share price is at a 10-year low – but the dividend income is stunning! appeared first on The Twelfth Magpie.

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• 3 top income-focused stocks to buy in May 2026, according to experts
• How to invest £150 a month in shares to target a £7,660 passive income for life
• How much do investors need in a SIPP to cover the UK’s £1,377 average rent?
• Here’s how much to put in your ISA if you hope for passive income of £21,000

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Generating a passive income of £692 a week could transform your life. And it might be easier than you think. Want to know how?

A popular way of doing that is to invest in a spread of FTSE 100 companies, inside a Stocks and Shares ISA. UK blue-chips pay among the most generous dividends in the world. Some yield as much as 5%, 6% or 7%, with potential share price growth on top. 

That £692 adds up to £36,000 over a full year. Generating the capital to fund that income will take time, but can be done with discipline and patience. Better still, inside an ISA there’s no tax to pay. So it’s worth more than it seems.

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.

Can I really earn that level of income?

Investing is riskier than leaving money in a Cash ISA. But history shows long-term returns are much higher. Over the last decade, the average Stocks and Shares ISA returned 9.5%, against just 4% for the average Cash ISA. My table shows how the difference builds over the years. After a decade or two, it’s massive.

Cash ISAs work best for short-term savings, rather than long-term wealth-building. Ideally, investors should ideally aim to build a balanced portfolio of at least a dozen stocks from a spread of sectors. One FTSE 100 stock that’s done well lately is oil and gas giant BP (LSE: BP).

The BP share price is up 40% in the last year, and 70% over five years. Long-term investors have got plenty of dividends on top, with the stock typically yielding around 5% in that time. Following the share price surge, the trailing yield has slipped to 4.5%. That’s still a pretty good rate of income.

So how big a pot do I need?

Of course, not every investor would want to buy BP. Fossil fuels are a controversial area. Also, BP has bungled its strategy, making a shift into renewables, then beating an embarrassing retreat. The crisis in Iran has given BP shares a short-term lift. Yet investors are wary, because we don’t know what will happen next in the Gulf. If there’s a peace deal and the oil price retreats, BP could slip. That might also offer a buying opportunity.

Despite these risks, I hold the stock myself. Even with the energy transition, the world needs fossil fuels for decades to come. There will be ups and downs in the share price but with luck, the dividends will keep rolling in. I’ve matched BP with different dividend stocks, including Lloyds, insurer Legal & General, pharmaceutical giant GSK and housebuilder Taylor Wimpey. 

So how much do investors need to generate a second income of £692 a week? Let’s say their ISA portfolio returns that annual 9.5% average. In that scenario, they’d need £315,789. Building that kind of wealth takes time, but it can be done. The sooner you get going, the better.

The post How much do you need in an ISA for a £692 weekly passive income? appeared first on The Twelfth Magpie.

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Harvey Jones has positions in Bp P.l.c., GSK, Legal & General Group Plc, Lloyds Banking Group Plc, and Taylor Wimpey Plc. The Motley Fool UK has recommended GSK and Lloyds Banking 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.

Personally, I think I’ve found all of those things in FTSE 100 wealth manager M&G (LSE: MNG). I’m sitting on a total return of 92% since adding this stock to my Self-Invested Personal Pension (SIPP) in July 2023, less than three years ago. The share price has climbed from 200p to 300p in that time, an increase of 50%. Reinvested dividends have done the rest.

It helped that M&G shares were yielding 10% when I bought them, which is an extremely high rate of dividend income. But it’s also a brilliant example of how income can turbocharge growth. The dividend hits my account twice a year, typically in May and October, and I really notice the difference. I’ve bought 3,028 shares from my own pocket. Today, I own 3,858. The additional 830 were bought from reinvested dividends.

Why do I like FTSE 100 income stocks so much?

I think many investors underestimate the power of FTSE 100 stocks. The index has grown nicely lately, rising 45% over the last five years.

That’s below the 77% increase on the S&P 500, but UK blue-chips pay more income. The average yield on the FTSE 100 is 3.3%, against roughly 1.1% for the S&P 500. That narrows the gap, especially for investors who target higher yielders like M&G.

Today, investors won’t get the same level of income as I did. The trailing yield is now 6.8%. That’s still pretty generous, and with luck, it’s only for starters.

The board is aiming to increase shareholder payouts by 2% a year. That’s forecast to lift the yield to 6.99% in 2026 then 7.2% in 2027. Dividends are never guaranteed, but I think M&G looks in decent shape to support them. Last year, its Solvency II coverage ratio hit 242%, up from 223% in 2024, driven by strong operating capital generation and favourable market movements. M&G only joined the FTSE 100 in 2019, but has increased shareholder payouts every year since. So what about the growth?

Can the M&G share price keep climbing?

That isn’t guaranteed either, of course. And I think the M&G share price could slow after such a strong run, that’s seen it climb 40% in the last 12 months. Yet with a forward price-to-earnings ratio of 12.4, I don’t think investors are overpaying today.

Obviously, these are volatile times, and if we get a wider stock market correction, M&G shares will feel it. It also operates in a fiercely competitive market and needs to keep finding new streams of business to maintain growth and keep the cash flowing. But while future share price gains may come in fits and starts, the steady stream of reinvested dividends should help total returns compound nicely over time.

Personally, I think M&G is one of the most compelling passive income opportunities to consider in the FTSE 100 right now. I’ll be watching closely to see whether it can sustain those dividends, while continuing to deliver some growth on top.

The post Why this 6.8% high yielder is now my favourite UK passive income and growth stock appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended M&g 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.

Getting a tax-free passive income from an ISA is a dream for many. It’s a route to the ultimate investment goal – financial independence. So how much money would you need to generate £767 a month?

That’s currently the national average full-time salary, and adds up to £39,884 a year. That’s a handy sum to have in retirement, on top of the State Pension and any other income sources. How can you generate that?

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.

A popular choice for long-term Stocks and Shares ISA investors is to build a diversified spread of FTSE 100 shares offering both dividend income and growth. But how much would it actually take to generate that level of income? The answer depends heavily on the portfolio’s yield. 

How much capital do I need?

• 4% – £997,000.
• 5% – £797,680.
• 6% – £664,733.

That’s not the kind of money you can build overnight. It demands investing regularly every month and sticking with it for decades, while re-investing every dividend you receive to let compounding do its work. The next question is this, which shares can help drive that growth and income? 

A stock I think investors might consider is FTSE 100-listed bank NatWest Group (LSE: NWG). The NatWest share price has had a terrific run, shaking off lingering memories of the financial crisis to climb 199% over five years. It’s been caught up in recent volatility though, falling more than 5% in the last month.

On 1 May, NatWest also posted a 12% rise in first-quarter profits and lifted 2026 income guidance. I thought the results were pretty good, but markets had hoped for more. They were also wary of a potential £140m impairment linked to Iran exposure. The shares fell more than 5% on the day. I bought them.

NatWest’s heavily tied to the UK economy, and if economic growth slows, loan impairments could rise while mortgage activity weakens. Like all of the big FTSE 100 banks, it also faces competition from smaller but nimbler ‘challenger’ banks.

NatWest has a really eye-catching dividend

I thought NatWest shares were too cheap to resist. And I still do. Today, the forward price-to-earnings ratio is just 8.2. By comparison, the average FTSE 100 P/E is around 15. But here’s the big attraction.

NatWest’s a top income stock. It currently has a bumper forward yield of around 6.2%, which is forecast to hit nearly 7% in 2027. I think that’s stunning. Investors can underrate the impact of reinvested dividends. Over time, they can make up roughly half of an investor’s total return.

When they’re this big, it could be even more. Dividends are never guaranteed, of course. The board is also running a £750m share buyback, further boosting shareholder returns.

Investors should look to build a balanced portfolio of around 15 stocks. Passive income seekers they might want to focus on more generous yielders like NatWest. I can see plenty more high-yield dividend heroes out there today.

The post How much does an ISA investor need to target a £767 monthly income? appeared first on The Twelfth Magpie.

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• How much do you need in an ISA to earn a second income of £14,713 a year? 

Harvey Jones has positions in NatWest Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

A Self-Invested Personal Pension’s (SIPP) a terrific way to generate a long-term income in retirement. Building a pot of money for later life is more urgent than ever, as growing numbers struggle to get on the property ladder. Many could find themselves still paying off mortgage debt in retirement. Others will struggle to buy at all, and may have to rent their home in retirement. It’s a real threat.

More than a million mortgages now have terms extending beyond State Pension age. And the number of private renters over 65 has risen 24% in the last five years to 461,000. In February, the average rent was £1,430 a month, which adds up to £17,160 a year. So how much would a pensioner need in their SIPP to cover that?

How much do I need to cover my rent?

The answer depends on the yield it generates. Today, many investors like to put their money into a spread of FTSE 100 stocks paying dividend income, as well as offering share price growth potential. The average FTSE 100 yield’s currently 3.3% but it’s possible to generate as much as 5%, 6%, or 7%, by targeting stocks that pay above average dividends. Here’s how big a pot you’d need to fund the average rent, depending on the yield.

• 5% yield – £343,200.
• 6% yield – £286,000.
• 7% yield – £245,143.

Today, the most generous income stock on the entire blue-chip index is insurer and asset manager Legal & General Group (LSE: LGEN). It boasts an astonishing trailing yield of 8.67%. At that rate, somebody could cover their rent with a pot of £197,924. However, I’d never suggest anybody goes all in on just one stock. Dividends are never guaranteed, and diversification’s essential.

I’d suggest building a portfolio of around a dozen shares, to spread the risk. I think Legal & General’s worth considering as one of them. In fact, I hold it. I’m reinvesting every dividend I receive to buy more shares in the stock, and will draw them as income after I stop working.

But there’s an issue with this stock. While the dividend income’s brilliant, the Legal & General share price has performed poorly. It’s up 5% over the last year, but still trades at similar levels to a decade ago. Investors will be comfortably ahead on income, but frustrated by the lack of growth.

A spread of FTSE shares is vital

The underlying business has become a little too sprawling and messy, and profits have been bumpy at times. However, management’s been working hard to streamline the company’s structure and generate new sources of profits. And it’s keen to reward shareholders too. In March, Legal & General launched a record £1.2bn share buyback, while hiking the dividend by 2%.

Stock performance tends to be cyclical, and I’m hoping Legal & General shares will swing back into favour once current geopolitical uncertainty passes. I still think it’s well worth considering as part of a balanced portfolio for long-term investors focused on income, whether they’re homeowners, tenants or simply have regular bills to pay.

The post How much do investors need in a SIPP to cover the UK’s £1,377 average rent? appeared first on The Twelfth Magpie.

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• 3 top income-focused stocks to buy in May 2026, according to experts
• How to invest £150 a month in shares to target a £7,660 passive income for life
• The Legal & General share price is at a 10-year low – but the dividend income is stunning!
• Here’s how much to put in your ISA if you hope for passive income of £21,000

Harvey Jones has positions in Legal & General Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

The first rule of predicting a stock market crash is never, ever predict a stock market crash. Why? Because they’re entirely unpredictable. 

As the world faces the biggest energy shock in its history, I’d have expected global share prices to have gone into meltdown weeks ago. But they haven’t. So why are the FTSE 100 and other indexes holding firm?

Share prices have certainly been volatile. But the UK’s blue-chip index is still up 3.75% so far this year, and 20% over 12 months. I think that’s pretty solid, given the scale of the threat.

So why haven’t share prices tumbled?

Just a few months ago, oil traded at around $60. Today, a barrel of Brent crude costs $107. In the past, dramatic shifts like that have triggered recessions and worse. Yet every time markets dip, they quickly recover. Investors have shown their resilience lately, shrugging off Covid, Ukraine, US tariffs and now war in Iran. They’re holding the line today even with the crucial Strait of Hormuz oil supply route still closed.

So far, we’ve avoided oil shortages in the West, by drawing down inventories and strategic reserves. But we can’t do this forever. If supply tightens, the market crash could still come, and I’ll be watching closely, waiting for a buying opportunity. But there’s one thing investors can do today.

And that’s to scour the FTSE 100 for top UK stocks that have taken a beating lately, and offer lower valuations and higher yields as a result. These five have been hit hard over the last three months.

I’ll be exploring all of these opportunities in the days ahead but right now I’m particularly intrigued by 3i Group (LSE: III) because I hold it. In fact, until recently, it was a portfolio star, having doubled my money in just over two years.

Can this FTSE 100 stock make a stellar recovery?

3i is a private equity specialist with a track record dating back to 1946. Lately, it’s been the vehicle for a single staggeringly successful holding, European non-food discount retailer Action. The chain now boasts more than 3,300 stores across Europe, attracting 2.6m customers every week.

Action’s sales grew another 16.1% to €16bn in 2025 but investors were starting to get nervous even before recent geopolitical uncertainty, fearing it would struggle to maintain its breakneck growth. Investors were in two minds over plans to move into the US, a famously tough market to crack.

But here’s why I’m highlighting it now. Before the sell-off, the investment trust was trading at a massive premium of 29% to underlying net asset value. Today, investors can buy it at a 15% discount. Also, the dividend yield has crept above 3%. 3i directors have been pouring their own money into the stock. I’ve taken advantage of recent dips too.

If markets do crash, 3i Group shares could fall even further, but I think they’re well worth considering today. Let’s see what summer brings. Will you be joining me in monitoring 3i’s progress?

The post Is a summer stock market crash now inevitable? appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barratt Redrow, Reckitt Benckiser Group Plc, and Weir 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.

Investing in a Stocks and Shares ISA investing is a fabulous way to build a passive income for retirement. So how much do you need in your portfolio?

The answer depends on the yield. Right now, a popular choice for long-term ISA investors is to build a diversified spread of FTSE 100 shares offering both dividend income and growth. UK blue-chips offer some of the most generous dividends in the world. The average yield across the index is currently around 3.3%.

How much income could I hope to get?

Let’s say somebody had £299,000 in their portfolio. If they put their money in a FTSE 100 tracker, they’d get £9,867 a year. Or £822 a month. And that’s without touching their capital. That’s fine, but it’s possible to get a yield of 5%, 6% or even 7%, by investing in the more generous dividend stocks on the index. Let’s see what you can get then:

• 5% yield – £14,950 a year
• 6% yield – £17,940 a year
• 7% yield – £20,999 a year

A yield of 7% would be pretty tricky to maintain. But it is possible. Legal & General Group is the most generous income stock on the FTSE 100 with a bumper 8.7% yield. Standard Life is in second place yielding 7.3%, while real estate investment trust Land Securities Group yields around 6.9%.

One stock I’d consider for a high income portfolio today is Barratt Redrow (LSE: BTRW). It’s now the UK’s biggest housebuilder but like the rest of the sector, it’s taken a beating lately. The Barratt Redrow share price is down 43% over the past year and 66% over five. What’s going on?

House builders were slammed by the cost-of-living crisis, which drove up mortgage rates and worsened affordability issues. They were also hit by the end of the Help to Buy scheme in 2023, and the cladding fire safety scandal that followed the Grenfell tragedy. This year looked more promising with inflation and mortgage rates expected to fall. Instead, they’re rising due to Iran.

Can this FTSE 100 stock bounce back?

As a result of all this, the shares look cheap. Today, the forward price-to-earnings ratio sits around 10.2. That’s pretty low. The trailing dividend yield is a bumper 6.5%.

A word of warning. The forecast yield is 5.5%. On 11 February, Barratt Redrow cut its interim dividend by 9% to 5p per share. That followed a 13.6% decline in adjusted pre-tax profit to £199.9m. The forecast yield is 6.1% in 2027, but we’ll see. Dividends are never guaranteed. Yet I still think it’s worth considering for brave investors willing to take the long-term view. So what’s swung my decision?

Barratt Redrow boasts a strong balance sheet with net cash of around £550m to £650m. At some point the investment cycle will swing and when it does, its shares could recover at speed. No guarantees though. Things could get worse before they get better. But I think this stock could form part of an ISA portfolio, for those keen to build a generous second income, and with luck, grab some share price growth as well.

The post £299,000 in a Stocks and Shares ISA? See how much income that could give you appeared first on The Twelfth Magpie.

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Harvey Jones has positions in Legal & General Group Plc and Standard Life. The Motley Fool UK has recommended Barratt Redrow and Land Securities 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.

Rolls-Royce (LSE: RR) shares have given investors a thrilling ride. Over five years, they’re up 1,033%, turning £10,000 into a stunning £113,300. No wonder investors love this stock. But can it give them a reason to keep on loving it?

I’d say the answer’s yes, but in a different way.

Anybody buying Rolls-Royce today has to accept the shares aren’t going to rise another 1,033% in the next five years. This is now a £100bn company, so that would turn it a massive £1.1trn enterprise. Today, the FTSE 100 is only worth £2.5trn in total.

Can this FTSE 100 stock climb higher still?

Any investor considering Rolls-Royce shares therefore must accept the growth must slow. CEO Tufan Erginbilgiç has worked wonders since January 2023, but the group’s stellar post-pandemic rebound has run its course. Over one year, the shares are still up an impressive 55%. But they’ve edged up just 5% in the last six months. And fallen 4% in the last month. The trend’s clear.

I can see why investors would consider taking profits today. Especially if they got in early, and Rolls-Royce makes up a big chunk of their overall portfolio. Some investors set a rule of never putting more than 5% or 10% in any one stock. That’s wise. Yet I still think it’s worth retaining exposure to Rolls-Royce.

This is still a brilliant British company with long-term growth opportunities across all three of its divisions – civil aerospace, defence and power systems.

Three reasons to consider buying

• Rolls-Royce can still roar. In 2025, it posted a 40% increase in underlying operating profit to £3.5bn. Highlights included a strong turnaround in civil airspace, booming demand for data centre power and continued high defence spending.
• Nuclear power offers a huge opportunity. Its small modular reactors (or mini-nukes), are attracting interest from the UK, Czech Republic, Sweden and beyond.
• Investors won’t just get growth. The board recently announced share buybacks of £7bn to £9bn in total between 2026 and 2028. There are dividends too, although the forecast yield is a modest 1%.

Three reasons to be cautious

• Rolls-Royce shares are expensive. Today, the price-to-earnings ratio is 41. That’s down from more than 65 just a few months back, but is still well above the FTSE 100 average of around 15.
• There’s little room for error. After all the excitement, any slight miss in future profits or earnings could be heavily punished.
• The Iran war is a risk, as Middle East travel hubs close and jet fuel shortages loom. This threatens civil aerospace revenues, where lucrative maintenance contracts are based on miles flown. A wider recession would be an issue too.

I still think Rolls-Royce has a role to play in a balanced portfolio. However, investors will have to get their rewards from a combination of steady growth, dividends and buybacks over the years. Anybody wanting a more jazzy recovery play should consider looking elsewhere. The next Rolls-Royce is out there. I’m determined to find it.

The post Investors need to face the truth about booming Rolls-Royce shares  appeared first on The Twelfth Magpie.

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Harvey Jones has positions in Rolls-Royce Plc. The Motley Fool UK has recommended Rolls-Royce 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.

The State Pension isn’t enough to live on. Retirees need £13,400 a year just for a basic ‘minimum’ lifestyle, according to the Retirement Living Standards survey.

If they want to be comfortable, they’ll need a lot more than that, as this table shows. 

The new State Pension, paid to those who retire from April 6, is worth at most £12,547. That’s below the bare minimum required. Which is why it’s essential to save under your own steam.

I think the Stocks and Shares ISA is one of the best ways of doing it.

How much income could I get from an ISA?

Right now, a popular choice for long-term ISA investors is to build a diversified spread of FTSE 100 shares offering both dividend income and growth. They can re-invest the dividends to turbo-charge their total return when working, then draw them as income in retirement. 

Now let’s say their portfolio generates an average yield of 5% a year. To hit that income target, they’d need £752,820, which is a lot of money. Let’s say somebody has 30 years before retirement. They’d need to tuck away £505 a month, assuming an average total return of 8% a year.

That takes dedication and commitment, but the rewards are huge.

So how can I get a high yield?

Today, an impressive 14 FTSE 100 stocks yield 5% or more, including housebuilder Persimmon (LSE: PSN). It’s forecast to yield 5.7% this year, rising towards 6.2% in 2027. That’s a terrific rate of income, but it isn’t all good news.

Recent years have been tough for housebuilders, as higher inflation, low affordability, the fire safety cladding scandal and end of the Help to Buy scheme squeeze sales and prices.

2026 looked promising with interest rates expected to fall, then came war in Iran. The oil spike’s now driving inflation back up, and mortgage rates could follow. The Persimmon share price is down 18% in the last year, and 66% over five. So why would anybody buy this stock today?

Buying beaten-down companies can be a winning strategy, as it allows investors to get in at a lower valuation and higher yield. However, patience is required. The UK economy’s struggling, and while the property market’s holding up, the UK’s troubles could last a while longer.

However, with a modest forward price-to-earnings ratio of 10.2, Persimmon investors are taking a position at a big discount. I think it’s worth considering for long-term investors up for the challenge. At some point, this stock could take off. Just don’t expect it to happen overnight.

The post How much do you need in an ISA for an annual income worth double the £12,547 State Pension?  appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Persimmon 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.