There are loads of top dividend stocks on the FTSE 100 that I’d buy to generate a passive income in retirement, but what if I could only choose one?

It’s a tough call to make as there are so many top income stocks out there. Right now, fund manager M&G and housebuilder Persimmon both yield more than 10%. Imperial Brands and Rio Tinto yield more than 9%. Abrdn and Phoenix Group Holdings pay more than 8% a year. These are incredible returns, at a time when a best-buy easy-access savings account pays just 0.65%.

I’d buy this FTSE 100 Legal eagle

If I could only pluck one dividend stock from the index, I would go for Legal & General Group (LSE: LGEN). The £14.55bn insurance giant isn’t the whizziest stock, but it’s a solid name, with a solid business, and pays a solid level of passive income.

Today, L&G yields 7.2% a year, with dividend cover of 1.3 times. The forecast dividend yield is even more promising at 7.9%, with cover of 1.8.

It’s a pretty reliable dividend too. Unlike FTSE 100-listed insurers Aviva and RSA, L&G maintained its dividends through the pandemic. Management also kept staff on and shunned furlough support.

It didn’t emerge completely unscathed. The group’s final 2020 dividend payment was held flat due to Covid, and management also cut its dividend growth target for the next five years. Yet today’s passive income level still looks enticing to me.

What isn’t so enticing is its growth potential. The Legal & General share price trades at similar levels to five years ago. There have been up and downs along the way, but few signs of a breakout. Yet I’m looking for passive income here, rather than active growth.

The L&G share price crashed on Friday, by 5.62%, compared to a drop of 3.48% across the FTSE 100 as a whole. Yet I reckon current fears could be a buying opportunity, and L&G’s valuation looks tempting to me. It currently trades at a relatively low forward valuation of 8.3 times earnings, well below the FTSE 100 average P/E of 14.3. Its price-to-sales ratio is 1.1. That’s hardly demanding.

This is a top passive income stock

Legal & General is widely diversified across a broad range of personal finance areas, selling everything from general insurance and protection to investment funds, pensions, equity release and bulk annuities. It’s also a direct investor in housing and commercial real estate.

Interestingly, it’s one of just a handful of companies that continue to sell annuities, which could now swing back into fashion as interest rates finally pick up. The group is also well capitalised, and has forecast operating margins of 18.5%, and return on capital of 10.6%. This should help keep that passive income sustainable.

I’m not getting carried away. Legal & General is one of those stodgy, boring stocks that investors overlook when markets are flying. That may be an advantage right now. One year ago, it reported a 2% dip in full-year operating profits to £2.4bn. We will find out how well the last year has gone when it reports on Wednesday.

Another risk is that lack of share price growth — and the worse-than-average fall last week that I mentioned above. If it fails to grow in price, its dividends may not be enough.

Either way, I’d buy it for passive income ahead of any other FTSE 100 stock today. Then hold it for years and years.

Harvey Jones doesn’t hold any of the shares mentioned in this article. The Motley Fool UK has recommended Imperial Brands. 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.

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As the global geopolitical situation deteriorates, I am preparing for the worst in my portfolio. As of yet, investors have been spared a stock market crash. That does not guarantee one is not around the corner. Investors and the broader market are incredibly skittish at the moment. Anything could spark a market sell-off. 

That said, there is no guarantee we will see a stock market crash. It is impossible to tell what the future holds for any asset price or geopolitical situation. Stock markets could continue to fall, or they could suddenly turn around. 

With that being the case, I am focusing on investing in high-quality companies that should prosper, no matter what the future holds for the global economy. 

Stock market crash protection 

There are plenty of these businesses on the London market. Indeed, one such company is the London Stock Exchange. This organisation controls the UK stock market and has a strong position in European financial markets as well. On top of this, it has a growing presence in the international financial data market. 

Stock market volatility could actually be good news for this group. It generates revenue from equity trading, and a stock market crash could lead to more trading. Unfortunately, the company is unlikely to escape unscathed.

It could suffer if there is a significant drop in new businesses coming to the market. This IPO business generates a lot of money for the group. The London Stock Exchange’s profits could slump if corporations pull their listing plans. Despite this risk, I would be happy to buy the stock for my portfolio today. 

Another investment I would add to my portfolio — to add a layer of protection against a potential stock market crash — is the Capital Gearing Trust. This investment trust seeks to protect and grow investors’ funds by building a portfolio of defensive assets. There is no guarantee it will protect investors from all market downturns, but its diverse portfolio will provide some protection against uncertainty. 

Getting defensive 

I am also preparing for the worst by moving away from expensive growth stocks. Investors have been willing to pay a premium multiple for growth stocks in the past. This may not continue in the event of a stock market crash.

Investors might pull their money from these growth equities in order to protect their portfolios from further losses. In an uncertain environment, the companies where the market is expecting the most are usually the first to suffer. 

And finally, I would acquire utility companies like National Grid. The group owns a defensive monopoly in the UK electricity market. This market is unlikely to see a sudden drop in demand in the event of a stock market crash.

The one major challenge this corporation faces is the regulatory environment. Regulators essentially set how much money it is allowed to earn from customers, which could hold back growth in the long run. 

Nevertheless, when combined with the other groups outlined above, I think the National Grid could help insulate my portfolio from a stock market crash. 

Rupert Hargreaves owns Capital Gearing Trust. 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 BT (LSE: BT.A) share price has plunged over the past few weeks. I think this is a fantastic opportunity for long-term investors like myself to snap up some shares in the telecommunications giant at a discount price. 

Improving potential

As the largest telecommunications company in the UK, BT has certain defensive qualities about it. While some consumers might decide to cut back on spending in an uncertain economic environment and reduce expenditures on premium packages provided by the group, they are unlikely to cut back on the basic services. 

This suggests the company will continue to have a steady stream of income from customers buying its broadband and phone deals.

BT has been investing heavily in its offer over the past couple of years. This investment has had a significant impact on the company’s bottom line. It is spending billions on building out its fibre broadband network, and this money is not going to shareholders.

Some investors might be disappointed by the company’s decision to spend so much on building out its network, but I believe it is the right decision.

The UK telecoms market is incredibly competitive, and BT needs to keep spending to stay ahead of the competition.

Investments pay off

These initiatives are already starting to yield results. City analysts have pencilled in earnings growth of around 6% for the 2023 financial year, the first time the company will report growth since 2016.

That is assuming the corporation hits these projections. There is no guarantee that it will. Rising costs and the competitive environment are all challenges the management will have to overcome in the next few quarters. 

Still, if the company does meet these forecasts, the BT share price looks inexpensive at current levels. It is currently selling at a forward price-to-earnings (P/E) multiple of 8.6. That is below its five-year average, which is around 10. 

After cutting its dividend in 2020, the company is also expected to hike its distribution in the next two financial years. Based on current projections, the stock is expected to support a dividend yield of 4.3% for the 2022 financial year and 4.3% for 2023. 

BT share price outlook 

Considering all of the above, I would be more than happy to add BT to my portfolio today. As the economic and geopolitical outlook becomes more and more uncertain, companies with defensive qualities like BT could come back in favour with investors. 

There is no guarantee the market will re-rate the stock to a higher multiple. Nevertheless, it could act as a safe haven for investors in stormy waters in an uncertain environment.

The company will almost certainly face some challenges as we advance, but it is trying to meet these challenges head-on with increased spending. So far, the results are positive. I am excited to see what the future holds for the enterprise. 

Rupert Hargreaves 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.

How far does £150 go in a month? A few nights out? Booking a weekend away somewhere? Buying a new piece of kit for a hobby? All of those could be tempting, but I would also be attracted by the possibility to set up passive income streams for the long term by squirreling away my £150 every month in a Stocks and Shares ISA. Here is how I would go about it.

What can I do with £150 a month?

Over a year, saving £150 a month would add up to £1,800. That is a fair bit of money. If I invested it in shares yielding 4% — close to the average for the FTSE 100 – I would hope to generate around £72 of passive income in a year.

In the second year of my passive income plan, I would hopefully buy shares that generate another £72 of passive income annually in future. But I would still own the shares I bought in the first year if I had not sold them. So, over time, putting a steady £150 a month into my Stocks and Shares ISA should let me see my passive income streams increase, as I buy new shares while still getting dividends from ones I bought before.

Why I like shares for passive income

There are a number of ways I could use my £150 a month to earn passive income, such as putting it in a savings account. So why would I invest it in stocks and shares?

When I look at a company like Apple or Tesco, I am excited by the prospects their businesses have in coming years. They have large customer bases and well-established brands that can help support their profit margins. As an investor, I can get some exposure to such companies simply by buying their shares. Both Apple and Tesco pay dividends, so I could aim to earn passive income simply by putting some of my £150 monthly savings into their shares. Hopefully if their businesses perform well in future, that may enable them to raise their dividends – and my passive income.

But even a successful company can face business challenges that hurt its dividends. An accounting scandal at Tesco in 2014 led to it cancelling its dividend completely, for example. The retailer has returned to health and is now paying dividends again. But the moral of the story is that I would reduce my risk by spreading the money in my Stocks and Shares ISA across different companies.

Making a move

Just thinking about what I could do will not earn me any passive income, though. I need to take action.

That can start with the simple move of setting aside £10 a day. I could also set up a Stocks and Shares ISA so I am ready to start buying dividend shares once I have chosen some companies I think could help me meet my investment objectives. Then, I need to start finding out more about shares – and which ones could be the most promising when it comes to my passive income plans.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple and Tesco. 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.

My top oil penny stock to buy right now is EnQuest (LSE: ENQ). This is not the only small-cap oil producer on the London market, but I think it is in the best position to profit from rising sector prices. 

Not only will the enterprise benefit from higher prices, but I think investors will also benefit as the company’s profits grow, enabling the group to stabilise its balance sheet. 

Penny stock qualities

Most oil and gas companies hedge the price of their production. By using this approach, these enterprises can lock in future cash flows at predefined prices. This means they have some protection from a substantial fall in oil prices. Unfortunately, it also limits gains from rising prices. 

According to EnQuest’s latest trading update, the company has locked in 8.6 mmbbls of oil production this year with an average floor price of c.$63/bbl and an average ceiling price of c.$78/bbl.

If the firm is able to meet the upper end of its output target of 51,000/bbl a day in 2022 this means it has hedged roughly 50% of its production at these prices. With the current price of oil averaging more than $100/bbl, EnQuest could be on track for windfall profits this year. 

Even if oil prices fall substantially, the company’s decision to lock in a $63/bbl floor should help minimise the risk. 

Rising oil prices are one of the reasons why this group is my favourite oil penny stock to buy right now. Another factor is the corporation’s debt. Investors have been avoiding EnQuest for years due to its high level of debt. At the end of December, the company’s net debts amounted to $1.2bn (£900m) compared to its market capitalisation of £422m. 

Management was already projecting that debt would fall this year, thanks to lower costs and higher oil prices. With oil prices surging above the company’s expected range, it looks as if the business will have even more flexibility to reduce borrowings.

A stock to buy today

Still, the corporation will have to overcome some challenges. Rising maintenance and wage costs could increase operating costs. There are also growing calls for a windfall tax on energy producers. Such a tax could have a significant impact on the company’s projections. It would undoubtedly force me to revisit my expectations for the business over the next few years. 

Even after taking these risks into account, EnQuest remains my top oil penny stock to buy right now, and I would be happy to add it to my portfolio.

In the base-case scenario, I think the company will be able to start reducing debt over the coming year while investing in its operations.

In the best-case scenario, if oil prices remain high, I think the business will be able to take a significant chunk out of its borrowings. In this situation, the market’s opinion of the company could change significantly as it repositions itself on a more sustainable footing. 

Rupert Hargreaves 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.

I am aiming to build a passive income stream of around £1,000 a month. One asset I plan to focus on to achieve this aim is dividend shares. Indeed, I believe buying dividend shares is one of the most straightforward ways of achieving a regular income. 

That said, as dividend income is paid out of company profits, it should never be taken for granted. If a company’s profits suddenly decline, the business may have to reduce its distributions to investors. Shareholders are usually the first to suffer if a corporation sees a sudden drop in profitability.

However, despite this drawback, I believe the strategy still has tremendous potential. 

Passive income strategy

To earn a passive income of £1,000 a month, I estimate I will need to build a large financial nest egg in the first place. I believe I can buy a portfolio of stocks and shares with an average dividend yield of 5%. If I invest around £300,000, I estimate I could earn a passive income of approximately £13,000 a year at this rate of return.

There is a bit more to my strategy than just buying stocks yielding 5%. I am targeting companies at both ends of the income spectrum. Enterprises that offer dividend yields of more than 5%, and less than 5%. I believe this style will help me build diversification into the portfolio and reduce the impact of any dividend cut on my income stream. 

Some examples of the organisations I will be buying for my portfolio include Phoenix Group, which currently supports a dividend yield of 7%. Over the past couple of years, this company has proven itself as a dividend champion. It manages a portfolio of pension and life insurance assets to generate cash to return to investors. 

Another company I would buy at the other end of the yield spectrum is the generic pharmaceuticals business Hikma. With a yield of less than 2%, this stock is not a traditional income investment. Nevertheless, with profits set to rise substantially over the next few years, I reckon there is plenty of room for the payout to expand further in the years ahead. 

While I would buy both of these stocks today for passive income, I should note they are not immune to the risks I have outlined above. If either firm suffers a fall in profits, they may decide to slash their investor payouts. 

Dividend shares for the long run

That is the strategy I plan to use to generate a passive income of £1,000 a month. Unlike other income strategies, this approach does not require a lot of work. All I need to do is select a portfolio of stocks, and then I can sit back and let these companies take care of themselves. 

That is another reason why I have decided to follow this approach. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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 IAG (LSE: IAG) share price looks cheap, compared to its trading history. However, while the stock might look cheap, the company’s underlying fundamentals are not that great.

The coronavirus pandemic decimated the firm’s balance sheet, and now management is having to deal with the geopolitical crisis engulfing Europe.  

Still, even after considering these factors, the outlook for the business is starting to improve. And considering its current valuation, I think there is an argument to be made that the IAG share price does offer fundamental value at current levels. 

FTSE 100 opportunity 

I should make it clear that when I say I think the IAG share price offers value, I mean I think the stock looks cheap compared to its potential over the next five-or-so years.

This is a not a trade for the next few months, or even the next year. IAG may take years to recover from the pandemic. And there is plenty that could go wrong in the meantime. 

Nevertheless, if sales can recover to pre-pandemic levels, the stock looks cheap compared to its international peer group.

In 2019, the British Airways owner reported total revenues of £21.2bn. Many of its peers are trading at a price-to-sales (P/S) of around one. Therefore, if the company’s sales return to 2019 levels, I estimate the stock could be worth around 30% more than its current price. 

There are a lot of assumptions going into this figure. So I do not think it is entirely reliable. However, I believe the figure illustrates the company’s current undervaluation compared to its potential. 

IAG share price comparisons

Even if I assume the stock is undervalued by 30%, I do not think it is the cheapest opportunity in the FTSE 100. The company might have to deal with plenty of potential risks over the next few years. These could hold back growth. 

By comparison, a number of other FTSE 100 corporations, including the consumer goods champion Unilever, seem to have brighter prospects. 

Unlike IAG, this company has a stronger balance sheet and much more control over its international supply chain. The market has been selling the stock recently due to concerns about rising costs in its supply chain. But management believes it can work through these issues by increasing prices. 

Compared to the airline group, I think Unilever has brighter prospects and looks cheaper when considering its potential over the next five years. 

The bottom line

Overall, while I think the IAG share price does appear cheap, I do not believe it is the best opportunity in the FTSE 100. 

That said, I would be happy to buy a speculative position in the company for my portfolio. As a recovery play, I think it has potential.

However, I am not going to be buying a full position until there is more clarity on the long-term outlook for the aviation industry. 

Rupert Hargreaves owns Unilever. The Motley Fool UK has recommended Unilever. 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 end of the tax year is fast approaching, which means the deadline for contributing to a Stocks and Shares ISA for the current tax year is also fast approaching. 

Investors can put away £20,000 a year in an ISA wrapper. As long as the money is inside the wrapper before the end of the tax year, they can take as long as they want to invest it. 

However, the allowance itself is a ‘use-it-or-lose-it’ allowance. Investors only get £20,000 a year, and any unused allocation is not rolled over.

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.

That is why I try to use as much of my allowance as possible every year. I am currently planning to invest a lump sum of £20,000, which I already own in my Stocks and Shares ISA. 

There are a handful of investments on the market right now that I would like to put into my portfolio. 

Stocks and Shares ISA buys

The companies I am targeting are spread across a broad range of sectors of industries. At the one end, I would like to have some exposure to the resource sector. One of the best ways to do this, in my view, is to buy the commodity trading giant Glencore. 

This company has its fingers in many different pies. It trades everything from coal and oil to grain and other foodstuffs. It also owns a vast network of infrastructure assets to shift these commodities around the world. 

This is not the sort of network any corporation can build overnight. It has taken the group decades. I think this is a substantial competitive advantage for the business, which is why it is my favourite commodity sector buy. 

Despite its competitive advantages, the company remains exposed to the volatile commodity market. A sudden drop in prices could significantly impact its balance sheet and profit margins. 

Consumer goods and technology

I would also invest some of my portfolio in consumer goods companies. I would buy Reckitt for my portfolio to play this theme. This consumer goods group is investing heavily in diversifying its product lines. While it will face challenges such as higher commodity prices due to inflation, management believes the enterprise can offset this with higher prices. 

I also want some exposure to the technology sector in my ISA. I think the Scottish Mortgage Investment Trust can provide this exposure. The trust has a fantastic track record of picking and choosing companies in the tech sector. It has an experienced management team and an internationally diverse existing portfolio.

The one downside of outsourcing the investment management process is that I will not be able to choose investments. As a result, I could end up owning companies in the portfolio that I would like to avoid. 

Despite this challenge, I would be happy to invest a percentage of my £20,000 Stocks and Shares ISA investment in this successful investment trust. 

Rupert Hargreaves owns Reckitt plc. The Motley Fool UK has recommended Reckitt 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.