Building a balanced portfolio of FTSE dividend shares is a common strategy for investors looking to generate passive income for a comfortable retirement. However, what if you could only buy one stock? In that case, you would have to take a very different approach and carefully consider the risks and rewards of each potential investment.
One option for a one-stock portfolio is to choose a high-yielder like wealth manager M&G, which offers an impressive income of almost 9% a year. While M&G’s shareholder payouts may seem secure at the moment, it is still a risky strategy as the share price has struggled to grow. On the other hand, you could opt for a relatively safe choice like transmissions monopoly National Grid, which currently yields 5.47%. However, the utility’s share price took a hit after announcing plans to raise £7bn for renewable power transition, raising concerns about its high level of debt.
Another solid FTSE 100 blue-chip option is Unilever, but it doesn’t offer enough income with a yield of less than 3%. Oil giant BP, with a yield of 5.39% and cheap shares trading at six times earnings, is another consideration. However, the energy sector is cyclical and risky, making it a less stable choice for a one-stock portfolio.
If you had to choose just one stock for life, Lloyds Banking Group (LSE: LLOY) emerges as a top contender. Despite being perceived as a dull choice, Lloyds offers a more stable investment option with less volatility. The bank’s focus on personal and small business banking reduces its risk profile, making it a safer bet compared to other FTSE 100 banks.
Lloyds’ share price is currently trading at 7.4 times earnings, which is significantly lower than the FTSE 100 average. The stock has shown impressive growth of 36.3% in a year, although the trailing yield has decreased to 4.8%. However, management aims to increase dividends year after year, with a forecast yield of 5.6% that is comfortably covered by earnings.
While investing in just one stock is not advisable, if forced to make a choice, Lloyds Banking Group stands out as a reliable option for passive income. The bank’s stable business model and commitment to increasing dividends make it a strong contender for a one-stock portfolio.
In conclusion, while diversification is key to a well-rounded investment strategy, carefully selecting a single stock like Lloyds Banking Group can provide a solid foundation for generating passive income in the long term. It’s important to consider the risks and rewards of each potential investment and choose wisely based on your financial goals and risk tolerance.
