With that in mind, Imperial Brands (LSE:IMB) currently stands out as one such opportunity that might be worth considering. The tobacco stock pays an annual dividend of 160.32p per share. That means 7,485 shares generate £11,999.95 in annual passive income, essentially the equivalent of £1,000 a month.

Of course, at its current share price of 2,737p, buying close to 7,500 shares would set investors back by a fairly massive £204,864, well beyond what the average investor can reach in a single transaction.

But there’s no rule that says an investor has to buy all these shares at once. By drip feeding money over time, investors can start steadily accumulating shares and accelerate the process by reinvesting any dividends paid along the way.

But that still leaves one important question: is Imperial Brands even a good investment?

Is there a strong bull case?

Despite the shares slipping on a recent trading update, Imperial Brands remains in a remarkably resilient financial position.

The group confirmed it’s on track to deliver at least high-single-digit underlying earnings growth and more than £2.2bn in free cash flow for its 2026 fiscal year (ending in September). While expected cash generation is down from around £2.7bn in 2025, it’s still more than enough to cover the near-£1.55bn in dividends being paid out to shareholders.

In other words, the stock’s current 5.9% yield looks pretty robust. Throw in the expansive share buyback schemes, and the stock now offers one of the most attractive cash yields in the entire FTSE 100.

Moreover, when digging a bit deeper, the group’s next-generation products (NGPs), which cover vaping, heated tobacco, and oral nicotine, are growing at welcome double-digit rates in key markets including Europe, Asia, Africa, and Australasia.

That’s critical given the ongoing regulatory clampdown against traditional tobacco products. And by 2030, management expects NGPs to represent a meaningful slice of the revenue stream.

So is this a no-brainer?

Where is the risk?

While the company’s trying to transition itself towards NGPs, the reality is that Imperial Brands still makes the bulk of its money from tobacco. And as previously mentioned, regulators around the world are increasingly making life difficult for this business and its rivals.

As regulations tighten and public health awareness grows, cigarette volumes are declining structurally across developed markets. In other words, the clock’s ticking for Imperial Brands to make its successful transition, translating into some significant execution risk.

So where does that leave investors today?

The bottom line

When exploring tobacco stocks, it’s impossible to ignore the ethical dilemma of investing in a business that sells products that have proven long-term negative health effects.

However, for investors who are nonetheless comfortable investing in this sector, the company appears to be offering one of the most reliable and generous income streams in the UK stock market today.

Whether that can continue over the next decade is where the uncertainty lies. But so far, management seems to be taking the right steps. So for patient investors looking for a chunky passive income opportunity from the FTSE 100, Imperial Brands could be worth a closer look.

The post Should investors buy 7,485 shares of this FTSE 100 stock for a £1,000 monthly second income? appeared first on The Twelfth Magpie.

A risk here is any sustained strengthening of the British pound. This would cut the sterling value of profits in any of its key overseas markets, most notably the US. Another would be supply-chain disruptions that could affect production and squeeze margins.

That said, it remains a cash‑rich business with disciplined payouts that make it a rare source of dependable income. And analysts forecast its earnings will rise by a solid 4% over the medium term, underpinning these returns.

So, how much could investors make from the stock over time?

Rising dividend yields forecast

Imperials Brands’ current dividend yield is 5.8%, compared to the FTSE 100’s average of just 3.1%.

However, analysts forecast that it will lift its annual payouts to 168.8p this year, 177.3p next year, and 186.8p in 2028. These would give respective annual dividend yields of 6.1%, 6.4%, 6.7%.

The rising trend in its dividends has been a feature of the firm for years. Since 2021, for example, it has increased its yearly payout from 139.08p to 160.32p in 2025. These generated average annual dividend yields of 8.9%, 7.6%, 8.8%, 7.1%, and 5.1%.

The drop in dividend yield, despite the rising payouts, illustrates that these returns can change over time.

How much dividend income?

A £20,000 holding (the same as mine) would buy around 719 shares in Imperial Brands at today’s price.

After 10 years on the forecast 6.7% yield, investors would make £19,012 and after 30 years £128,434. This assumes that the dividends would be reinvested in the stock to utilise the turbocharging effect of dividend compounding.

At the end of the 30-year period, the total value of the holding would be £148,434 (including the initial £20,000).

And that would generate an annual income of £9,945.

Share price gains too?

All the stocks I buy primarily for their high dividend yield also look deeply discounted to their ‘fair value’. This encompasses the true worth of the underlying business, while price is just whatever the market will pay at any point.

Crucially for investors, share prices tend to move toward their fair value over the long run. So understanding the difference between the two measures — and quantifying the difference — is critical to maximising long-term profits.

My discounted cash flow analysis (including an assumed 9% discount rate) shows Imperial Brands’ shares are 44% undervalued at their current £27.83 price. Other analysts’ DCF modelling may be more bearish, along with the key assumptions used.

But my DCF result suggests a fair value for the stock of around £49.70 — much higher than today’s price.

So that price-to-value gap suggests a potentially superb buying opportunity to consider today if those DCF assumptions prove accurate.

My investment view

Imperial Brands offers a rare blend of high income, steady dividend growth, and deeply-discounted valuation, in my view. I think the stock well worth of consideration by savvy, long-term income investors.

I will certainly be adding to my holding in the firm shortly. And I also have my eye on other high-yield stocks that look seriously undervalued too.

The post I’m aiming for £9,945 in annual dividend income from 719 shares in this FTSE 100 gem appeared first on The Twelfth Magpie.

The blue-chip index closed at 10,667 on Friday (17 April). That’s just 2.2% below its all-time high of 10,910, reached on 27 February, the day before the conflict began. That’s a remarkable show of resilience. Can it go ont o break 11,000 from here?

This has been an odd crisis. We’ve had dire warnings of the biggest oil shock in history. Yet investors have been perfectly happy to take Donald Trump at his word that everything’s under control.

The FTSE 100 could fly

On Friday, they got what they wanted. Trump confirmed the Strait of Hormuz is open. The FTSE 100 jumped, while the S&P 500 hit a fresh record of 7,126 after rising 1.2%. We’ve seen this a lot lately. Geopolitical shocks trigger a sell-off, then bargain hunters pile in. The Covid slump in 2020, the Ukraine invasion in 2022 and US tariff threats in 2025 all fit that pattern.

This confirms our firm view at The Motley Fool, that selling in a panic rarely pays. Instead, investors should grit their teeth, and take the opportunity to snap up cut-price shares. It isn’t easy though, when the headlines scream catastrophe. Plenty will have waited for even lower prices and missed the bounce.

So what happens on Monday? The rally could continue. Or it might well reverse, following reports that Iranian gunboats are targeting shipping in the Strait of Hormuz. Either way, investors should find plenty of bargain stocks out there. To my surprise, cigarette maker Imperial Brands (LSE: IMB) is suddenly one of them.

Imperial Brands shares look good value

Tobacco stocks have been among the best FTSE 100 performers of the millennium. That’s extraordinary, given the steady decline in smoking rates across the West. Imperial Brands, like FTSE 100 rival British American Tobacco, has used its branding power to grab a bigger share of a shrinking market, while moving into alternatives such as vapes. And it’s kept investors sweet with a steady stream of rising dividends.

Its shares fell hard after Tuesday’s underwhelming trading update. Imperial Brands reported a decent start to its 2026 financial year and stuck to guidance of 3%–5% growth in underlying operating profit. Yet investors fixated on slippage in its Next Generation Products portfolio, and weaker market share in key regions.

That points to tougher conditions ahead but the reaction still feels harsh. Imperial Brands is the FTSE 100’s biggest faller over the last month, down more than 13.5%. Over 12 months, it’s slipped 6.5%. That leaves it looking good value though.

Imperial Brands now trades on a modest price-to-earnings ratio of 8.86, while the yield has crept up to a juicy 5.77%. Tobacco stocks aren’t for everyone, and they’re under constant regulatory threat. But at this price, and with that income, it still looks worth considering.

There’s plenty more value left in the FTSE 100 and that’s unlikely to change. Whatever happens in the next few volatile days.

The post Will the stock market go off like a rocket on Monday? appeared first on The Twelfth Magpie.

They’re still up 82% over a five-year basis. So the FTSE 100 company’s been far from a disaster for long-term investors. And that’s before factoring in its enormous dividends over the period.

Today’s investors aren’t interested in what’s gone before though. So let’s ask the question: is Imperial Brands’ share price at the start of a prolonged correction?

Guidance maintained…

Today, Imperial Brands released a fresh trading update. The market didn’t react well to what it saw.

But why? In it Imperial Brands said it remains on track to meet full-year guidance of “low-single-digit tobacco and double-digit NGP (Next Generation Products) net revenue growth”. The NGP category includes products like its blu vapes and Pulze heated tobacco.

Adjusted operating profit growth is still tipped at 3%-5%, with pricing initiatives in the first half expected to offset volume declines.

Imperial Brands is a cash machine, and is still expecting free cash flow of £2.2bn this year. And it’s sharing the wealth with investors via juicy share buybacks — it’s completed £700m of the £1.45bn of repurchases planned for this year.

All pretty solid, then.

… so what’s going on?

The boost from large buybacks and dividends to shareholder returns are nice. But the market really wants to see progress in NGP profits. Investors are running out of patience, as Imperial Brands’ plunge today shows.

Despite soaring sales, the huge investment it’s making in vapes and the like remains problematic for the bottom line. The firm said “NGP adjusted operating losses are expected to be moderately higher“, reflecting things like R&D costs, marketing expenses and distribution build-out costs.

With demand for its traditional combustible products in terminal decline, NGP profitability needs to start improving… and fast. Instead, profits from new product lines are heading in the other direction. Established products such as Gauloises cigarettes still dominate its product mix, accounting for 90% of sales.

Are Imperial Brands shares a buy?

Imperial Brands has significant pricing power across its portfolio, which it can leverage to grow earnings. And while it’s still playing catch-up in the NGP market, sales are still growing at a strong rate. Over the long term, this remains a potentially lucrative sector for the company.

So should investors consider buying Imperial Brands after its recent share price trouble? Let me tell you where I stand. With NGP profitability still possibly a long way off, and demand for traditional cigarettes cratering, it’s a share I wouldn’t touch with a bargepole.

There are also big questions over the safety of NGPs. Could we see restrictions on their sale and usage being imposed down the line, just like cigarettes? It isn’t impossible, in my view. Fierce competition in this segment also poses significant risk.

Today’s drop leaves Imperial Brands shares on a price-to-earnings (P/E) ratio of 9.9. Even at current prices I’m not tempted to buy.

The post Down 7%! Why on earth are Imperial Brands shares plummeting today? appeared first on The Twelfth Magpie.

Either way, that income is tax-free inside a Stocks and Shares ISA. So how large does an investor’s portfolio need to be to target £1,500 a month income, which adds up to £18,000 a year?

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.

Dividend power

Under the so-called 4% safe withdrawal rule, taking that proportion of a portfolio each year as income should preserve the underlying capital. On that basis, a portfolio of £450,000 is required to generate £18,000 a year.

If the investor is happy to draw down some of their capital as well, to increase the annual return to say, 7% a year, the required portfolio falls to £257,000. This approach demands close monitoring to make sure the capital doesn’t run dry.

Another route is to invest in higher-yielding FTSE 100 shares and draw dividends as income. If the portfolio yields on average 5% a year, the investor potentially earns £18k from £360,000, with no capital withdrawals. As my figures show, this is a movable feast. It depends on the investor and the stocks they buy.

There are some eye-popping yields on the FTSE 100 today. Insurer Legal & General Group yields 8.4% on a trailing basis, while Standard Life sits close behind at 7.9%. High yields can be hard to sustain, as companies need strong cash flows to fund them. I hold both stocks, and think they look reasonably secure for now, but I balance them with a spread of other dividend stocks.

Imperial Brands: dividend hero

Tobacco companies have been a terrific source of dividends and growth for years, and the FTSE 100 boasts two big names: British American Tobacco and Imperial Brands (LSE: IMB).

Smoking is a health hazard and regulation’s tight, but the addictive nature of the product delivers resilient cash flows and reliable dividends. Imperial Brands has increased shareholder payouts every year this millennium, except in the 2020 pandemic year. The current trailing yield is 5.1%. Forecasts suggest it will climb to 5.47% this year and 5.75% in 2027.

Investors have also enjoyed plenty of share price growth on top. The Imperial Brands’ share price has climbed 8.75% over the last year and an impressive 84% over two.

After that strong run, the Imperia Brands price-to-earnings ratio has crept up to 12.5. It’s not expensive, but not an absolute bargain. There are risks. Further regulation, especially around vaping, could hit revenues. Earnings could also fall if smoking rates in emerging markets decline as they have in the West. After such a strong recent run, the shares could naturally ease up for a while.

I think Imperial Brands is worth considering as a long-term hold for income-focused investors comfortable with buying Big Tobacco. Only invest as part of a balanced portfolio, across a range of income stocks from different sectors. Today’s stock market volatility is throwing up plenty of bargain buying opportunities.

The post How big does an ISA need to be to aim for a £1,500 monthly second income? appeared first on The Twelfth Magpie.

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.

Market darling

Tobacco giant Imperial Brands (LSE: IMB) is one stock I’ve got my eye on.

Sure, this business won’t be to all investors’ tastes, in much the same way that people might not want to back defence contractors or gambling firms. However, there can be no doubt that it’s performed marvellously for those willing to own a slice of it for the long term.

Anyone buying this stock five years ago would have pretty much doubled their money. Despite a stunning 2025, the FTSE 100 index in which the £24bn cap features is up ‘just’ 50% in the same period. Again, we have another example of how — with a bit of skill and luck — a regular, private investor can absolutely thrash the market return. Moreover, they don’t necessarily need to get involved in the murky world of penny shares to do so.

Dependable dividend stock

Imperial’s outperformance since the global pandemic has been down to a few factors. These include a successfully-executed turnaround strategy, consistent revenue growth, and the growing popularity of next-generation products including vapes, heated tobacco, and nicotine pouches.

But it’s not just these things that have attracted new investors. Put simply, it’s also been (and remains) a stellar source of income.

Right now, analysts have the company down to return 168p per share to investors in FY26. Using the current share price, that equates to a dividend yield of 5.5%. Again, this puts the index to shame. A FTSE 100 tracker offers around 3%.

An above-average yield can sometimes be the result of a company’s share price tanking, perhaps due to concerns on its outlook. However, we know that’s not the case here. In fact, it’s estimated that Imperial’s distributions will be covered twice by profit this year. Unless we get some news flow that truly shakes market confidence, I reckon investors will get their money.

All this, when combined with a forecast price-to-earnings (P/E) ratio of nine, suggests new owners will be getting quite a lot of bang for their buck. Imperial is also cheaper than its top-tier peer British American Tobacco (P/E of 12).

Just the start of my search

Of course, depending on just one company for passive income is still courting disaster. However reliable it has been in the past, Imperial could run out of puff going forward. I’m wary that traditional tobacco consumption is still falling. There’s no guarantee that its new products will be able to make up for this lost revenue in the long term. Even if they do, a business like this will always be a target for regulators.

With this in mind, I’m going to continue adding companies to my shortlist. With markets looking fragile as the US and Iran attempt to agree on a peace deal that will actually last, now could be a great opportunity to go bargain hunting.

The post 1 mighty FTSE dividend stock I’m considering for my ISA appeared first on The Twelfth Magpie.

A risk here is any slippage in its transition away from tobacco products and to nicotine substitutes. This could give an advantage to its competitors doing the same thing. Another would be any new litigation arising from one of its new products, which could lead to significant costs.

However, analysts forecast that its earnings will increase by a solid 4% over the medium term. So what sort of returns from dividends and share price can I expect from here?

Consistently rising dividends

Imperials Brands increased its annual payouts in each of the past five years, from 139.08p in 2021 to 160.32p in 2025. These generated average annual dividend yields of 8.9%, 7.6%, 8.8%, 7.1%, and 5.1%.

The declining recent yield — despite the hike in annual payout — underlines that these returns can change over time.

That said, analysts expect dividend payouts to rise to 168.7p this year, 177.2p next year, and 186.9p in 2028. These would generate respective dividend yields of 5.5%, 5.8%, and 6.1%.

By contrast, the present FTSE 100 average is just 3.1%, and the ‘risk-free rate’ (10-year UK gilt yield) is 4.9%.

How much can be made?

The standard investment cycle for long-term investors is around 30 years. It begins with first investments at around 20 and early retirement options at about 50.

After 10 years on the forecast 6.1% yield, investors would make £16,752 on an initial £20,000 holding. This assumes that the dividends would be reinvested to harness the extraordinary power of dividend compounding.

After 30 years on this basis, the dividends would increase to £104,101. Including the initial £20,000, the total value of the holding would be £124,101.

And that would generate an annual income of £7,570.

A share price bonus too?

I always buy stocks that look underpriced to their ‘fair value’. The number represents the true worth of the underlying business, while price is simply whatever the market will pay at any stage. The key point here is that asset prices tend to converge to their fair value over time. So knowing and quantifying the difference between the two is crucial for long-term investors’ profits.

In Imperial Brands’ case, a discounted cash flow analysis — including an assumed 8.8% discount rate — shows the shares are 41% undervalued at their current £30.54 price.

Some analysts’ DCF modelling is more bullish than mine, others more bearish, depending on the variables used. However, based on my DCF, the fair value for the shares is around £51.76 — substantially higher than today’s price.

So that gap suggests a potentially terrific buying opportunity to consider today if those DCF assumptions prove accurate.

My investment view

I have held the stock for some time now, periodically adding to it as prices dip. Given its recent price drop, its solid forecast earnings growth, and its extreme undervaluation, I will be adding to my holding soon.

I have also identified other similar stocks with even higher dividend yield forecasts in the coming years.

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A value stock is a company whose shares trade cheaply compared with its earnings or assets. I’ve been running through a list of blue-chip shares ranked by their price-to-earnings (P/E) ratios and plenty of top companies look cheap today.

A word of warning though. Just because a stock has a low P/E doesn’t automatically mean it’s good value. It could just as easily be a trap.

Buying cut-price shares

I hold two shares with extraordinarily low P/Es in my SIPP. Trainer maker JD Sports Fashion trades on just 6.6 times earnings, while British Airways owner International Consolidated Airlines Group sits at 6.8.

JD’s problems pre-date the Iran conflict as the cost-of-living crisis hammered sales. With oil climbing, that’s unlikely to change. I’ll have to be even more patient with this one. By contrast, IAG has been flying. Its shares are up 154% over three years and 20% over the last 12 months. Today, it’s hit by Middle East airspace closures and rising fuel costs. I think both value shares are worth considering, but only with a long-term view.

Several other FTSE 100 names also suggest value. Budget airline easyJet trades on a P/E of 7.1, Hikma Pharmaceuticals is on 7.8, NatWest Group on 9.1, gaming firm Entain on 9.3, Barclays on 9.5 and cigarette maker Imperial Brands on 10.1.

NatWest and Barclays tempt me. Their shares have been on a remarkable run, but investors fear the rally may have gone too far. Others worry the artificial intelligence bubble and global tensions could drive up loan impairments. Barclays has fallen 12% in a month. It’s now top of my shopping list.

Imperial Brands Group is a top income play

I’ve written about the banks a lot recently, so let’s look instead at Imperial Brands Group (LSE: IMB). Tobacco stocks are exactly the sort of defensive shares that can ride out geopolitical turmoil because smokers rarely abandon their habit during a crisis. The shares have slipped only 3.2% over the last month.

Long-term investors have still done extremely well. The shares are up 14% over one year and roughly 130% over five. Dividends come on top of that.

Today there’s a solid trailing dividend yield of 5.1%. Forecasts suggest that could hit 5.3% in 2026 and 5.6% in 2027. Some investors avoid tobacco stocks on moral grounds. But those who buy them have historically been well rewarded through both dividends and capital growth. That’s remarkable given that smoking rates continue to fall in many countries. Newer products such as vaping have opened additional revenue streams, although regulation and health concerns remain constant risks.

Imperial Brands still looks worth considering. It appears to combine income, resilience and value. We haven’t quite hit that once-in-a-decade buying opportunity for value shares. Markets haven’t fully capitulated yet. But it won’t take much bad news to change that. Even today, there’s already plenty of value out there for those who look.

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The real gems are the high-yield names with earnings that do not wobble when the economy does. These are the sorts of businesses that keep paying up even when sentiment turns sour.

Imperial Brands (LSE: IMB) has long looked to me like it perfectly fits this bill.

Key dividend drivers

Imperial’s business model is essentially a cash‑generation machine, and its 2025 results underline that strength once again. Price increases of 5.4% in its combustible portfolio more than compensated for falling volumes, keeping income flowing reliably.

The company’s five core markets — the US, Germany, UK, Spain and Australia — still deliver the bulk of adjusted operating profit. This anchors earnings in regions where performance is highly predictable, reinforcing the durability of future cash flows.

Additionally positive is Imperial’s tight cost control and ongoing simplification efforts. These helped drive adjusted operating profit up 4.6% to £3.99bn, nudging past the £3.98bn consensus. Those efficiencies also fuelled a 12% jump in free cash flow to £2.7bn, while adjusted earnings per share climbed 9.1% to 315p.

Meanwhile, next-generation products — mainly nicotine alternatives — delivered a 13.7% revenue rise over the year. This adds a steadily growing earnings layer for the years ahead.

A risk for Imperial is that the transition to these smoke-free products is delayed, allowing competitors to gain ground. Even so, analysts still forecast Imperial’s earnings will grow 4% a year to end-2028. And it is this that ultimately underpins any firm’s dividend payments over the long run.

Dividend outlook

Over the past five years beginning in 2021, Imperial has increased its dividend from 139.08p to 160.32p in 2025. This generated respective standout average annual dividend yields over those years of 8.9%, 7.6%, 8.8%, 7.1%, and 4.9%.

The current 5% dividend yield reflects the fact that these annual returns can go down as a share’s price rises, despite increases in yearly payouts. However, it still compares very favourably to the current FTSE 100 average dividend yield of just 3.1%.

That said, analysts forecast that the dividend will rise to 168.7p this year, 177.2p next year, and 186.9p in 2028. These would generate respective yields of 5.1%, 5.4%, and 5.7%.

How much passive income?

£20,000 — the same as I hold in the stock — would currently buy 607 shares in Imperial. Over 10 years on the forecast 5.7% yield, this would give £15,318 in dividends. This also assumes these payouts are reinvested into the stock to benefit from the turbocharging effect of ‘dividend compounding’.

On the same basis, the dividends would increase to £90,132 after 30 years. Adding in the original £20,000 investment, the holding would be worth £110,132 by then. And this would pay a yearly passive income from dividends of £6,278, assuming the dividend doesn’t go down at any point!

My investment view

I am optimistic Imperial’s dependable cash generation will keep its dividend growing steadily.

While the shift toward smoke-free products carries execution risk, the forecast earnings growth still supports a compelling long-term income case to me.

Consequently, I am happy to keep my holding in the firm and believe it well worth the consideration of other investors.

But these are not the only high-yielding passive income shares that have caught my eye in recent weeks.

The post Investors could target £6,278 a year in passive income from just 607 shares in this under-the-radar FTSE gem! appeared first on The Twelfth Magpie.

How’s this done? And how much money do investors need to make it happen?

Calculating targets

By relying on simple FTSE 100 index funds, investors today can expect to earn a yield of close to 2.9%. However, by being more selective and crafting a custom portfolio, it’s possible to earn closer to a 5% dividend yield each year without taking on too much additional risk.

If the goal is £1,500 a month, or £18,000 a year, then at a 5% payout, a SIPP would need to be valued at £360,000 – more than double the average size of UK pension pots.

Obviously, this is quite a large chunk of change. But for those who can spare £500 a month from their salary, it’s a threshold most people can reach.

Don’t forget, SIPPs offer tax relief. So for anyone paying the basic rate of income tax, every £500 deposit is topped up to £625 by the government. And assuming an investor’s portfolio matches the stock market’s average 8% annualised return, investing £625 each month will compound into a £360k pension pot in roughly 20 years when starting from scratch.

This goes to show that even someone who’s just turned 48 with no pension savings can still drastically improve the quality of their retirement lifestyle.

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.

Finding 5%-yielding stocks

Earning a market-beating yield requires a bit of investigative work. Higher dividend yields are often a reflection of the risk attached to a business. That’s actually why so many double-digit-yielding stocks often end up announcing payout cuts.

However, there are always some exceptions. And looking at the FTSE 100 today, one of these exceptions might be Imperial Brands (LSE:IMB) with its near-5% payout.

Not all investors are keen on tobacco stocks. But this moral objection, while understandable, organically lowers interest in tobacco stocks, creating more attractive valuations and, in turn, higher yields.

That’s proven quite advantageous for income-seeking investors who’ve been earning a high yield for years, backed by dividends that have been getting hiked every year since the pandemic. And with the addictive nature of its products unlocking substantial pricing power, this pattern isn’t expected to change anytime soon.

However, even with these favourable dynamics, dividends aren’t guaranteed. Increasingly strict regulations combined with a steady rise in consumer health consciousness are seeing a structural decline in tobacco consumption. And even Imperial Brands has seen its cigarette volumes start to shrink.

Management isn’t blind to this shifting landscape and has been aggressively investing in a new portfolio of ‘healthier’ products. And while these remain a relatively small part of the revenue stream today, it’s nonetheless expanding rapidly with the long-term aim of becoming a dominant source of income to offset the decline of traditional tobacco.

Whether Imperial Brands will be successful in this transition is where the uncertainty lies. But with a fairly undemanding valuation, this could be a risk worth considering for SIPP investors seeking passive income.

The post How much do you need in a SIPP to aim for a £1,500 monthly passive income? appeared first on The Twelfth Magpie.