The FTSE 100 index isn’t known for its technology stocks. But things are starting to change. Today, there are two tech companies in the index’s top 10 constituents. Here’s I’m lookng at one of them.

The company in focus today is London Stock Exchange Group (LSE: LSEG), or ‘LSEG’ for short. With a market cap of approximately £65bn, it’s currently the 9th-largest business in the Footsie.

Given its past history (as a stock exchange operator), this company is often still viewed as a financial firm. However today, it’s far more of a technology business.

You see, after the acquisition of Refinitiv in 2021, LSEG is now one of the world’s leading providers of financial data. Currently, it serves 99 of the top 100 banks and 75 of the top 100 global asset managers.

And its products and services are only becoming more technological. Recently, the company has been working with tech powerhouse Microsoft to incorporate artificial intelligence (AI) solutions into its offering (these will be rolled out this year).

These powerful new features should further entrench the company’s leading position in the financial data space. And they could end up being a significant growth driver for the group.

Worth a look today?

Is this tech stock worth considering for a portfolio today?

I think so. I hold its shares myself and it’s a large holding for me (meaning I’m confident in the long-term story).

In the years ahead, I expect LSEG to generate solid top- and bottom-line growth as it wins new customers, launches new products, and raises its ongoing prices. I also think there’s potential for higher valuations as investors realise that the company is now a major player in the financial data industry.

That said, I wouldn’t go ‘all-in’ on the stock today and buy a full-sized position to start with. If an investor was looking to get into this stock, I’d suggest that they consider starting with a small position and building it out over time.

Recently, the stock had a great run (it’s up more than 30% in the last year). So, we could see a pullback (some profit taking) in the short term.

In terms of the valuation, the forward-looking price-to-earnings (P/E) ratio is now about 29 using the consensus 2025 earnings per share forecast of £4.03. That’s not crazy for a software company but I’d prefer to invest at a slightly lower valuation as an earnings multiple of 29 doesn’t leave much room for a setback (like a loss of market share to a competitor such as Bloomberg).

The good news is that investors may not have to wait long for a better buying opportunity. Later this month, on Thursday 27 February, the company will be posting its full-year earnings.

Often with tech stocks, earnings (and forward-looking guidance) create some short-term volatility. So, we could see a nice entry point.

National Grid (LSE: NG) shares paid a dividend last year of 58.52p. On the current share price of £9.44, this means a yield of 6.2%.

So, investors considering a £9,000 stake in the multinational electricity and gas utility giant would make £558 in first-year dividends.

After 10 years on the same average yield this would increase to £5,580. And after 30 years on the same basis it would rise to £16,740.

Crucially though, by reinvesting the dividends back into the stock – known as ‘dividend compounding’ – vastly more could be made.

By doing this on the same 6.2% average yield, £7,704 would be made after 10 years not £5,580. And after 30 years on this basis, £48,537would have been generated in dividends rather than £16,740.

Including the £9,000 stake, the total value of the National Grid holding would be £57,537. This would be paying an annual dividend income of £3,568 by then.

A lower dividend but a higher share price?

A stock’s yield moves in the opposite direction to its share price. Analysts forecast that National Grid’s yield will drop to 5% in its fiscal year 2026 before rising slightly to 5.1% the year after.

That said, a firm’s share price (and dividend) are ultimately driven by its earnings growth. A risk to National Grid’s is the huge state-directed investment in infrastructure expected of it.

However, analysts project that this will increase 16% a year to end-2027. Indeed, its 7 November 2024/25 H1 results saw underlying profit rise 14% year on year to £2.046bn.

This came from higher revenues in its UK and US operations. It is not only the owner-operator of the electricity transmission system in England and Wales. But it also has more than 20m electricity, natural gas, and clean energy customers in New York and Massachusetts.

National Grid now forecasts operating profit growth for fiscal year 2024/2025 of around 10%. And from 2024/25 to 2028/29, it estimates a compound annual growth rate of 6%-8% in its earnings per share. 

How much value remains in the shares?

On the price-to-earnings ratio to start with, National Grid trades at 27.1 against a competitor average of 12.5. So, it is overvalued on this measure.

The same is true of its 2.4 price-to-sales ratio compared to an average 0.9 for its peers.

However, on the price-to-book ratio it looks undervalued at 1.3 against a 1.7 average for its competitors. These comprise Engie at 1.2, Iberdrola at 1.8, E.ON at 1.9, and Enel at 2.

I ran a discounted cash flow (DCF) analysis to gain further clarity on its valuation. This shows where a firm’s share price should be, based on future cash flow forecasts.

Using other analysts’ figures and my own the DCF shows the shares are 19% undervalued at £9.44.

So, the fair value for them is technically £11.65, although market unpredictability may push them down or up.

Will I buy the shares?

Therefore, if I were not focused on buying shares yielding 7%+ I would add National Grid shares to my portfolio today and I feel they are worth investors considering.

I think the high earnings growth potential will drive the share price and dividend much higher over time.

Warren Buffett is the epitome of a smart and cautious investor. When building his company Berkshire Hathaway, he seldom took risks or shortcuts, rather focusing on slow and steady growth.

While this style of investing might be boring, it’s proven to work for many people over the years. His time-tested principles emphasise the importance of value investing, understanding intrinsic value, and maintaining a long-term perspective — especially when markets seem overbought.

The FTSE 100 recently clocked a new all-high above 8,807 points, bringing year-to-date gains up to 6%. That’s almost a third of all the gains it’s made in the past five years!

Safe to say, a degree of caution may be necessary.

Investing with a margin of safety

One of Buffett’s core tenets is the concept of investing with a margin of safety. This involves purchasing stocks at prices significantly below their intrinsic value, providing a cushion against errors in analysis or unforeseen market downturns. 

By focusing on companies with strong fundamentals that are undervalued by the market, investors can mitigate potential risks associated with high market valuations. As Buffett advises, overpaying for a stock (even of an excellent company) can “undo the effects of a subsequent decade of favourable business developments“.

Focusing on quality businesses

Buffett prefers high-quality businesses with a clear competitive advantage, or a ‘strong moat’. Such companies are better positioned to withstand economic downturns and competitive pressures. 

Characteristics of such businesses include strong brand recognition, proprietary technology, and a sustainable growth trajectory. By identifying and investing in these companies during market highs, investors can better their chances of making sustainable returns.

Maintaining a long-term investment horizon

Irrational market behaviour can be misleading, often tempting investors with short-term gains and speculative opportunities. However, Buffett’s strategic investment approach has proven more successful in the long term.

Focusing on the intrinsic value of businesses rather than their stock price helps investors avoid the pitfalls of market timing and emotion-driven decisions. The success of Berkshire Hathaway is a testament to the power of patience and compounding returns.

A UK stock example

Applying Buffett’s investment criteria to the UK market, Unilever (LSE: ULVR) emerges as a noteworthy example. As a multinational consumer goods company, it boasts a diverse portfolio of well-established brands across the food, beverage, cleaning, and personal care sectors. 

This diversification not only maintains a stable revenue stream but reduces fallout from failure in a single product line. With strong brand recognition and global reach, the company has a substantial economic moat, protecting it from competitive threats.

Not that it’s without risk. Competition still exists and has hurt Unilever’s profits in the past. For example, during periods of high inflation, consumers often opt for lower-cost alternatives. On a global scale, currency fluctuations and supply chain disruptions threaten the company’s profits regularly.

Overall, it manages to achieve consistent results with steady earnings and dividends, aligning with Buffett’s preference for reliable and predictable returns. Investors should consider such companies during market highs as they can offer added stability and growth potential. That’s what makes Unilever a staple of my portfolio and one I intend to hold through good times and bad.

Earning a second income from investments can be a great feeling. And even for someone starting from scratch, the stock market can be a great place to look for opportunities.

When it comes to passive income, an obvious thing to pay attention to is the dividend yield a stock comes with. But that’s not the only thing investors should be considering. 

Long-term growth

Consumables distribution firm Bunzl‘s (LSE:BNZL) a good example. The stock currently comes with a 2% dividend yield, which is below inflation and below the Bank of England’s base rate. 

This however, misses an important point. The firm has increased its dividend per share for over 30 consecutive years – and since 2015, it has grown at an average of almost 8% a year.

If this continues, a £10,000 investment today could be returning £432 a year after 10 years, £932 after 20 years, and £2,013 a year after 30 years. I think that’s a significant return.

Of course, that depends on Bunzl being able to keep growing over the next three decades. And it’s worth noting the company’s strategy of expanding through acquisitions is a risky one.

Even the best investors make mistakes and opportunities might be hard to find in future. But the FTSE 100 company does have a defence mechanism to try and limit this risk.

If Bunzl’s management feels the right acquisitions aren’t available it can use the cash the firm generates for share buybacks. And that could well keep the dividend growing for the long term.

Alternatives

I think Bunzl’s well worth a look for investors prepared to build a passive income stream over time. But for those looking for more immediate cash, there are some other worthy alternatives.

BP and Shell are interesting candidates. Both stocks come with dividend yields above 4% and have – in my view – a promising strategy of focusing on hydrocarbons instead of renewables.

That creates a risk of prices falling, especially if OPEC production picks up. But I think sticking to what they excel in is the right strategy for the FTSE 100 oil majors.

Elsewhere, the likes of Tesco and Sainsbury’s benefit from much more stable supply and demand dynamics. And both come with attractive dividend yields. 

Discount retailers provide a threat in an industry where customers are mostly motivated by price. But scale provides an important advantage and the largest supermarkets have this. 

I think BP, Shell, Tesco, and Sainsbury’s are all worth considering for investors looking for a second income. They don’t have Bunzl’s growth prospects, but they offer higher starting yields.

Investing for income

The important thing with investing is to think about the long term. This is true whether investors are looking for extra income this year or 30 years from now.

A high starting yield can be attractive. But investors need to be confident there’s a decent chance of this proving sustainable over time for the stock to be worth considering.

BT Group (LSE: BT.A) shares have divided the investment world for years. Many shareholders seeking dividend income have been happy to sit back and take the cash. Others have been scared off by a 70% share price fall over 10 years.

But BT shares have been reasonably stable over the past five years. A bit volatile, but an overall 7.6% drop compared to five years of dividend yields around 5% and above doesn’t seem too bad.

And in the past 12 months, BT has been setting the scene for a comeback. In that time, the share price has climbed 35%. It means a £10,000 investment a year ago would be worth around £14,000 today if we include dividends.

One-off boost?

This new success came mainly following full-year results in May 2024. CEO Allison Kirkby’s cost-cutting plans were bearing fruit sooner than expected. OpenReach broadband reached over a million premises in the fourth quarter alone, and BT passed its peak broadband capital expenditure.

That’s all good, but with hindsight it seems like it might have been a bit of a one-off. Since then, market response to BT’s updates has been lukewarm. The most recent, January’s Q3 update, resulted in a couple of days of share price falls. The results weren’t bad, but revenue fell a bit and adjusted EBITDA only rose modestly.

News of BT’s fibre-to-the-premises (FTTP) roll-out was positive, having reached 17m premises so far. Extending fibre to the last few metres should squeeze the best out of the network. But technology talk rarely seems to move investors, who are surely more focused on seeing it all turn into profit.

Show me the cash

If analysts are to be believed, that should happen in the next few years, with forecasts suggesting a 17% earnings rise by 2027. The forecast dividend is at 5.3% and expected to increase too.

But I see a few things that could cloud what looks like an otherwise rosy future. One is BTs perpetual debt, coupled with its long-standing pension scheme problems. Some people simply won’t invest in a company that carries too much debt, and I’m usually among them.

And any idea that BT has passed its years of big spend and can now sit back and rake in the revenue seems misguided. It might be true for OpenReach broadband, and for a few years. But a decade from now, might we be talking about the costs of the latest terabyte rollout? About quantum computing making those old installations of 10 years ago obsolete?

I’ve no idea, I’m just making things up. But technology is not going to stop costing big money.

What next?

Can BT shares repeat that 35% rise in the next 12 months? I think there has to be a decent chance they can. But I think it might need something a bit special from full-year results again, due on 22 May.

And for those investors who can just switch off, forget share price ups and downs, and take the dividends, I reckon BT has to be worth considering.

There are far fewer technology stocks in the FTSE 100 than in the S&P 500. Given the price gains some of these US shares have made, any such British stock grabs my attention.

Cloud-based financial tools provider Sage Group (LSE: SGE) is one of the firms that keeps catching my eye.

However, it is up 39% from its 16 May one-year traded low of £9.56. And it is only 2% off its 6 February 12-month traded high of £13.48.

So, is it worth me buying it at the current price?

Price and value are not the same

Some investors think little value can be left in a stock after a significant price rise. Others believe they should jump on a rising share to capitalise on continued momentum.

As a former senior investment bank trader and longtime private investor, I think neither view helps in optimising investment returns. I know price and value are not the same. So my only question on any stock is whether there is any value left in it.

To begin to answer this question for Sage Group, I note it is currently trading at a price-to-sales (P/S) ratio of 5.5. This is bottom the group of its peers, which averages 9.2. This comprises Salesforce at 8.3, Oracle at 9, SAP at 9.5, and Intuit at 9.9.

So Sage group looks very undervalued on this measure.

The same is true of its 11.8 price-to-book (P/B) ratio compared to the 14.4 average of its competitors. And it is also the case with its 40.1 price-to-earnings (P/E) ratio against the 63.7 peer group average.

However, the second part of my standard stock price evaluation process highlights it may actually be seriously overvalued now.

This method involves looking at where any stock’s price should be, based on future cash flow forecasts for a firm.

The resulting discounted cash flow analysis using other analysts’ figures and my own shows Sage Group shares are 18% overvalued at £13.26.

Therefore, the fair value of the shares is technically £11.24, although market moves could push them higher or lower than that, of course.

Is it a growing business?

This DCF overvaluation suggests to me that more future cash flow growth has been factored into the share price than is merited.

However, this does not mean that the company is not growing strongly or that it will stop growing any time soon.

It may just be that investors have piled into the stock given its rarity as a FTSE 100 technology share. The same could be true of some or all its competitors too, given their comparatively high P/S, P/B, and P/E ratios.

In fact, Sage Group’s Q1 2025 results released on 30 January showed total revenue increasing 10% to £612m.

A risk to future growth is the high level of competition in this sector. Another is a recession in its key North American and European markets that would hit its core small- and medium-sized enterprises clientele.

Will I buy the stock?

Given its DCF overvaluation, I will not be buying Sage Group shares now.

However, it is on my watchlist as a good technology stock to review if its price comes down.  

US billionaire Warren Buffett once warned, “If you don’t find a way to make money while you sleep, you will work until you die”. Hence, maximising my passive income is a major goal.

Types of unearned income include savings interest, bond coupons, and property income. But my favourite is share dividends — regular cash payments from companies to their owners.

Delightful dividends

As my wife and I both work, passive income is a side hustle. But, come retirement, we will rely on passive income to fund our lifestyle.

Now for two problems. First, future dividends are not guaranteed, so they can be cut or cancelled suddenly. Indeed, many businesses did this during 2020-21’s Covid-19 crisis. Second, most UK-listed companies don’t pay out dividends. Some are loss-making with no cash to spare, while others reinvest their profits to accelerate future growth.

Powerful passive income

That said, the UK’s main stock-market index — the FTSE 100 — is packed with businesses paying generous dividends to shareholders. While the Footsie‘s average dividend yield is 3.6% a year, dozens of shares offer cash yields exceeding this.

For example, these three stocks — all owned by my family portfolio — offer some of the highest dividend yields in London:

Company	Phoenix Group Holdings	M&G	Legal & General Group
Market value	£5.1bn	£5.1bn	£14.3bn
Share price	506.5p	212.86p	242.72p
Dividend yield	10.5%	9.3%	8.5%
One-year return	0.8%	-5.1%	1.7%
Five-year return	-35.7%	-13.0%	-22.7%

Note that all three companies are in the same line of business: asset management and insurance. They are substantial businesses, with market valuations ranging from £5bn to £14bn. Nevertheless, I would never build a portfolio solely from these three shares, as this would be highly concentrated and hardly diversified at all.

The above dividend yields range from 8.5% to 10.5% a year, with the average from all three being 9.4% a year. That’s over 2.6 times the FTSE 100’s cash yield. But paying out high dividends can leave companies short of growth — note that all three share prices have fallen over the past half-decade.

My pick of this bunch

While I think all three companies are fine firms, the cream of this crop in my view is Legal & General Group (LSE: LGEN). During my long career in financial services, I came to genuinely admire this firm and its business model. Founded in 1836, L&G has grown over 189 years to become a stalwart of UK asset management and insurance.

This group is made up of three business divisions: asset management, institutional retirement (workplace pensions), and retail (individual pensions and insurance policies). At end-2023, the firm managed a whopping £1,159bn of financial assets, making it a leading European asset manager.

In its latest results, L&G revealed that its pension risk transfer business is going great guns. Also, it is selling its US insurance business to a Japanese insurer for $2.3bn (£1.8bn). The group also announced a £1bn share buyback and aims to return £6bn to shareholders through dividends and buybacks over the next three years. Nice.

Then again, L&G’s future profits and cash flow are heavily driven by the fickle tides of financial markets. Thus, if and when share and bond prices crash again (as in 2022), this juicy dividend could be threatened. Still, we hope to reap this potent passive income for many years to come!

BP (LSE: BP.) shares have performed poorly in the past five years, gaining less than 2%. And we can’t just blame weak market sentiment towards big oil for that. Rival Shell‘s up 40% over the same time.

Oil company shares are typically volatile and at the mercy of the oil price. So we need extra caution when looking at shorter-term price movements. But the comparison with Shell is telling, and something has clearly been going wrong at BP.

It looks like things might be changing. And the BP share price has risen 18% just since the start of 2025. That’s more than twice Shell’s progress. It means a £10,000 investment in BP shares at New Year is already worth £11,800. Can we look forward to more of that?

The 2025 boost has come very recently, spurred by evidence from different directions that BP is set to rethink its goals.

The ‘net zero’ thing announced back in 2020 with plans to move towards a carbon-neutral future shook the market. And since then, the problem I see is that BP’s repeatedly failed to give us much in the way of concrete plans. How will it achieve its aims? How will it keep profits coming in and dividends going out? Those questions haven’t been convincingly answered.

In early February, news broke that US hedge fund Elliott Investment Management is building up a stake in BP. Various sources suggest the activist investor is getting close to 5%. And it’s surely unlikely to do that without wanting to shake up the way BP does business.

In fact, the same sources suggest Elliott’s already in talks with BP ahead of its Capital Markets Day, scheduled for 26 February. What I want to see from that is a clearer way forward rather than the vague hand-waving we’ve had too much of.

Strategy reset

With 2024 full-year results on 11 February, CEO Murray Auchincloss said: “Building on the actions taken in the last 12 months, we now plan to fundamentally reset our strategy and drive further improvements in performance, all in service of growing cash flow and returns.”

In other times the idea of an oil producer needing a strategy reset might seem bizarre. Erm, drill for oil, sell it… what else is there? But even if BP goes back to tradition, it will still need to deal with the long-term move away from fossil fuels.

The growing urge to keep drilling and pumping could drive oil prices and profit margins down. Then we have these peace talks aimed at ending the war in Ukraine. Could that pave the way for Russian oil to flow back onto world markets?

There are good reasons to be wary of investing in oil stocks. But with a low forward price-to-earnings (P/E) multiple of under 10, a dividend yield of 5.3%, and an activist investor pushing for strategy change, BP’s the oil stock to consider for me right now.

With its rich dividend culture, the London stock market’s a great place for investors seeking passive income. Even in these uncertain times, there are hundreds of companies tipped to pay a large and growing dividend in 2025 alone.

Here are two that have grabbed my attention.

It’s essential to note that dividends are never guaranteed until they’ve been paid. But if broker forecasts are correct, a £20k lump sum spread equally across these dividend shares will produce a £1,420 passive income stream this year alone. That’s based on an average 7% dividend yield.

Here’s why I think passive income investors should give them a close look.

ITV

With the UK economy locked in low growth mode, commercial broadcaster ITV may struggle to improve ad revenues. Advertisers are already highly cautious, and bookings at the Love Island maker cooled in the run-up to October’s Budget.

Chances are high however, that ITV will still be able to pay the large and growing dividend that analysts expect. This year’s reward is covered 1.8 times by anticipated earnings, below the safety benchmark of 2 times.

But this figure is still pretty decent, while the FTSE 250 company also has a strong balance sheet it can use to finance dividends. Borrowings are steadily falling, and as of June the net-debt-to-EBITDA ratio was just 0.9.

ITV’s decision to repurchase £235m of its shares underlines the company’s robust financial foundations.

This is a dividend stock I think should be considered as a Hold for the long haul. I like its excellent progress its ITVX platform’s making in the streaming arena, while its ITV Studios production arm also has considerable potential as content demand ramps up.

ITV says it remains on course to double digital revenues to at least £750m over the five years to 2026 as ITVX users grow.

Primary Health Properties

Primary Health Properties is a real estate investment trust (REIT). This means it’s obliged to pay a minimum of 90% of profits from its rental operations out in dividends. In return, the business receives juicy tax breaks.

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.

This REIT classification on its own doesn’t guarantee a large and growing annual dividend. But it does — along with the firm’s positioning in an ultra-defensive sector — make it highly likely.

Primary Health owns and rents out frontline medical facilities like doctor surgeries. Their use remains stable at all points of the economic cycle, providing a dependable stream of rental income that can then be distributed to shareholders.

Rental collection was 99% in both 2022 and 2023, with rents also guaranteed by funding from government bodies like the NHS. This robustness means that Primary Health’s weak dividend cover of one for this year doesn’t overly concern me.

I think the FTSE 250 REIT has an exceptional long-term investment potential, as ageing populations in its British and Irish markets drive demand for healthcare properties. It’s why I hold it, despite the threat to asset values that higher interest rates pose.

Britons mostly don’t have to have enormous lump sums or purchase high-risk assets to build wealth. But history shows us that a patient approach to Stocks and Shares ISA investing can be an effective way to create a large fund for retirement.

The Individual Savings Account (ISA) is a great way to target passive income after investors finish work. The Cash ISA and the Stocks and Shares ISA shield savers and investors from capital gains and dividend tax.

Over time, this can mount up to tens (or even hundreds) of thousands of pounds. With reinvestment and the power of compounding, these savings can significantly accelerate wealth growth to provide financial security in later life.

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.

Here’s how prioritising investing in a Stocks and Shares ISA can create a handsome retirement fund.

The cost of security

Let me start by asserting the importance of the Cash ISA. Regardless of an investor’s goals, holding a certain amount of money in savings is generally a good idea to manage risk.

Unlike with stocks, where the value of my investment can fluctuate over time, my cash holdings remain 100% protected from volatility. But this security comes at a price. And over time, it can significantly impact chances of investing comfortably. Let me show you how.

Fancy a £419k portfolio?

According to insurance specialist Shepherds Friendly, the average Briton sets aside £421 each month for investments and non-investment savings. What would happen if someone parked the whole of this in the best-paying, easy-access Cash ISA on the market? That’s the 5%-paying product from Moneybox.

Over 25 years, that £421 would become £250,710. That’s not bad.

But there are two important caveats here. One is that it assumes interest rates will remain the same over that period. That’s a highly unlikely scenario. In fact, savings rates are collapsing as the Bank of England cuts interest rates.

The second is that this £250k is far lower than what someone could expect by also putting their money in a Stocks and Shares ISA.

Let’s say someone puts £100 in that Cash ISA each month, and the remaining £321 in a Stocks and Shares ISA. If they achieved a realistic average annual return of 9% on the latter, they’d have a total of £419,431 to retire on across both ISAs.

A top trust

Putting 75% of the leftover cash each month in riskier assets may not be for everyone. However, investing in a trust may be a more comfortable option to consider for cautious individuals.

Take the Finsbury Growth and Income Trust (LSE:FGT). Overseen by legendary investment manager Nick Train, this London-listed trust has holdings in 22 companies spanning multiple sectors.

These include consumer goods producers Unilever and Diageo, software developer Sage and financial services provider Hargreaves Lansdown. This approach helps to balance risk and reward, as well as provide a smooth return across all points of the economic cycle.

A large weighting of FTSE 100 shares also provides the trust with quality.

Its focus on UK equities means it carries more risk than more global funds. Yet since 2000, the Finsbury trust has delivered an average annual return north of 9%.

Past performance isn’t always a reliable guide to future profits. But trusts like this could be a great option for conservative and ambitious investors to consider.