Passive income from shares sounds glamorous until you actually sit down and do the maths. Fortunately, with Lloyds Banking Group, the sums aren’t too scary.
Lloyds is one of the most widely held stocks among ordinary UK investors, and it’s not hard to see why. The bank has been steadily rebuilding its dividend after the pandemic-era cuts, and its current yield sits at roughly 5.5% to 6% depending on where the share price lands on any given day. At the time of writing, shares are trading around the 60p to 65p mark.
So, targeting £1,250 a year in passive income. At a 5.7% yield, you’d need to invest approximately £21,930 to hit that figure. Divide that by a share price of 63p, and you’re looking at needing roughly 34,800 shares. That’s not pocket change, but it’s not an impossible figure either, particularly if you’re building a position gradually inside a Stocks and Shares ISA.
The ISA wrapper matters here. Dividends received inside an ISA are completely free from income tax, so every penny of that £1,250 stays in your pocket rather than a portion drifting off to HMRC.
“Lloyds is essentially a play on the UK economy,” one private investor noted on a popular UK finance forum. “When things are ticking along, the dividend holds up. The risk is always a downturn hitting credit quality hard.”
That risk is real and worth sitting with for a moment. Lloyds is heavily exposed to the UK mortgage market, and with household finances still under pressure, any serious uptick in defaults could squeeze earnings and, ultimately, the dividend. The bank has also set aside significant provisions for the motor finance mis-selling investigation, which adds another layer of uncertainty.
Still, analysts broadly expect the dividend to hold and potentially grow over the next couple of years. A forecast yield nudging toward 6.5% by 2026 would mean you’d need slightly fewer shares to hit your £1,250 target, which is a pleasant thought.
The bigger question is whether concentrating that much capital in a single UK bank fits your overall strategy, or whether spreading the risk across a handful of dividend payers might let you sleep a little easier at night.
