The stock markets have had a bumpy start to 2022, and with the current geopolitical instability, it’s possible the uncertain times will continue. Many investors consider gold as the ultimate asset in unpredictable times. I prefer holding an exchange-traded commodity (ETC) rather than physical gold. Once again I’m looking at why I consider iShares Physical Gold ETC (LSE: SGLN) one of the best ‘safe haven’ funds for my own portfolio.

My safe haven hedge against uncertainty

I’ve been holding iShares Physical Gold ETC for some time now. This fund tracks the spot price of gold, but trades like a share so can be bought and sold through most online brokers.

Its place in my portfolio is justified for two reasons. First, gold has long been considered a hedge against inflation. Simply put, inflation decreases the purchasing power of a currency, so you need more currency to buy the same amount of gold.

Second, gold can provide protection against a sudden market downturn. The price of gold is largely seen as negatively correlated with stock prices, since when the market collapses, investors often flock to the asset as a safe haven.

For example, when equity markets see a negative shock, like they did in March 2020, physical assets like gold tend to rise. In fact, looking at 2020 as a whole, the FTSE 100 fell more than 14%. In contrast, gold had one of its best years in a decade.

What could happen to the price of this ETC?

This ETC has been trading since 2011 and since then, I believe there have been a couple of notable stock market falls. During 2018, when the FTSE 100 declined by around 12% in the year, the price of this fund rose by over 3%. Also, during 2020 it increased by almost 20%.

2021 was a good year for stock markets and during the course of the year, this ETC fell by almost 6%. However, 2022 already seems to be shaping up differently and we have already seen a general decline in stock markets. In comparison, iShares Physical Gold ETC has enjoyed a 4% price rise year-to-date. Although I could be wrong, it’s possible that this fund will see further gains.

Worries about inflation, rising interest rates, and escalating geopolitical tensions might well see investors rushing to protect their wealth. This could drive up prices of ‘safe haven’ assets including gold. If so, iShares Physical Gold ETC should also see a price rise.

Nothing is certain, of course. Gold does not pay any dividends and so the return is entirely dependent on the price appreciation of the asset. It’s possible investors might shun the precious metal in favour of alternatives such as high dividend-yielding shares. In this scenario, maybe the price of this ETC will fall.

However, I think the key to building any resilient investment portfolio is diversification and I still think of iShares Physical Gold ETC is one of the best safe haven funds for my portfolio. I’m happy to continue holding a small allocation of it within my portfolio as a hedge against turbulent times.

Niki Jerath owns shares in iShares Physical Gold ETC. 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 believe investing in stocks and shares is one of the most straightforward ways to generate a passive income for life. Indeed, I think I can start generating income with a weekly investment of just £10. 

It might take a few years and a little patience, but I believe the strategy outlined below can help me generate a monthly income from equities. 

Passive income strategy

An investment of £10 a week, or £520 a year, might not seem like a lot at first. But small regular investments can really add up over the long term. 

Rather than investing this money in income stocks, to begin with I would acquire growth investments. The aim of this strategy is to increase my wealth as fast as possible. 

Over the past decade, the MSCI World Index has produced an average annualised return for investors of 12.5%.

Unfortunately, there is no guarantee the market will continue to produce a double-digit return every year. Past performance should never be used as a guide to future potential and I could even lose money.

Nevertheless, I think these figures illustrate the wealth-creating potential of equities in the long run. 

Using this number as a rough guide to potential returns, my figures show that by investing £10 a week into an MSCI World Index tracker, I can build a £10,000 nest egg within 10 years. Over the space of two decades, I estimate I could build a £50,000 investment pot. 

By increasing my weekly contributions to £40, my figures show I could build a nest egg worth nearly £200k after two decades of saving. 

I believe this would be enough to generate a regular, hands-free passive income from stocks and shares. 

From growth to income

When I have hit this target, I plan to switch from growth to income investing. If I can buy a portfolio of stocks yielding 7%, I estimate I could earn an annual income of £14,000. 

A couple of stocks on the market offer this kind of income potential. Companies like Persimmon, which currently offers a dividend of nearly 9%, at the time of writing. 

The one drawback of this approach is the fact that as dividend income is paid out of firm profits, it is not guaranteed. If company profits suddenly decline, shareholder dividends are usually the first to feel the pain. I will be keeping this in mind as I plan my strategy. 

Despite this drawback, I think the approach outlined above can help me meet my passive income target. If I can earn £14k a year in income, I can either reinvest the money to grow my wealth or use it to supplement my income.

Either way, I believe the strategy can help me generate a passive income for life. Even though it does have drawbacks, compared to other passive income strategies, I think this approach is the best for me in the long run. 

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.

With a spare fiver a day, can I set up passive income streams? The answer, in my opinion, is yes – although in the beginning the income will probably be modest. But hopefully over time it can start to grow into something more substantial. My approach would be investing in dividend shares. Here is how I would go about it.

Dividend shares as passive income ideas

The attraction of dividend shares for me is that the income I could earn really is passive. All I need to do is invest money in the shares, sit back, and wait for any income to come my way.

That is never guaranteed, though. Not all shares pay dividends. Even those that do can cut or cancel their dividends, for example because profits fall or they need the money to invest in their business. If I had bought shares in Shell or BP a few years ago, for example, I would have seen my passive income fall as both of them cut their dividends.

That is why, when choosing dividend shares for my portfolio, I always make sure to diversify across different companies and indeed business areas.

Starting with £5 a day

If I wanted to use more than £5 a day to set up my passive income streams, I could do. But I do not have to. In fact I think that is one of the attractions of building a dividend share portfolio as a source of passive income. Unlike alternative passive income ideas like buying a property to let, I can start with nothing and contribute a small amount each day over time to build up an income-generating asset base.

£5 a day may not sound like a big amount. But it adds up to over £1,800 in a single year. If I was to target an average dividend yield of 5%, I would hopefully earn £90 in passive income annually from the shares I bought in the first year alone. If I kept putting away my £5 a day, over time my portfolio would grow — and hopefully so would the dividends I got from it.

Finding shares to buy

One of the challenges if I was investing in shares for the first time would be figuring out what ones were right for me. Some might offer a high yield but have problems lurking beneath the surface. For example, the yield might be funded by profits from a business that is in rapid decline.

Or there may be a company with an excellent business but whose shares that are already priced high. For example, I like the dividend growth outlook at Judges Scientific. But with the current yield below 1%, it would not be one of the shares I would choose if I wanted to target an average dividend yield of 5%.

My approach would be to focus on high-quality companies that are in business areas I expect to be around for decades to come. Within that field, I would look for companies I think have the ability to keep generating strong free cash flow. That is what funds dividends — and those are the backbone of my passive income strategy.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Judges Scientific. 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.

All businesses that have exposure to retail carry some danger as spiking inflation batters consumer confidence. This includes Ediston Property Investment Company (LSE: EPIC), a UK penny stock whose rental income could suffer if its tenants go out of business, or ask for rent reductions.

That said, I think the long-term outlook for Ediston is highly attractive. And I’d use a 13% decline in its share price during the past month as a chance to buy it at a discount.

This property stock specialises in operating shopping parks, a part of the retail market which is performing strongly as e-commerce takes off. More specifically, Ediston’s properties have enough warehouse space and surrounding land to enable the business to ride soaring demand for ‘click & collect’ services from online shoppers.

Ediston’s share price is, despite heavy weakness more recently, up 12% over the past year. I expect the business to start to head higher again sooner rather than later.

Too cheap to miss?

Motor retailer Pendragon (LSE: PDH) could also suffer if shopper budgets continue to fall. It also faces some near-term peril as supply chain problems hit auto production and the prospect of stock shortages loom.

However, following recent share price weakness — Pendragon has just fallen to its cheapest since December — I think this penny stock could be too cheap for me to miss. Today, Pendragon trades on a rock-bottom price-to-earnings (P/E) ratio of just 6.8 times for 2022.

As a long-term investor, I think the car retailer has plenty of appeal. And I think it’s a great way to exploit rocketing demand for electric vehicles (EVs) in particular. Latest Society of Motor Manufacturers and Traders data shows sales of battery and hybrid vehicles leap 92.5% year-on-year in January. It’s a trend I expect to continue as fears over the climate crisis steadily increase.

Pendragon’s share price is up 46% during the past 12 months. I expect more robust increases over the long term as well.

Another top penny stock for the EV boom

I’d also snap up Phoenix Copper (LSE: PXC) shares to ride the EV revolution.

The red metal is a critical component in these low-emission vehicles, due its high connectivity. This is why analysts at ING Bank think copper loadings in cars and buses will likely leap to 3.2m tonnes a year from 440,000 tonnes in late 2021. They also believe copper demand in charging infrastructure will rise almost fivefold over the period, to 47 tonnes per annum.

Phoenix Copper, which owns the Empire metal mine in Idaho, should be well-placed to capitalise on rising copper consumption. That’s notwithstanding any revenues-hitting problems the business may encounter in developing its US asset.

Phoenix Copper’s share price has dropped 14% in the past week. This has eradicated all gains it has made over the prior 12 months. And, in my opinion, this makes the penny stock a highly attractive dip buy for me.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Pendragon. 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.

Investing in stocks and shares, especially if it’s within a tax-efficient Stocks & Shares ISA, can be a financially rewarding way to create a passive income. It’s not without risks, as all investments can go down as well as up and investors can of course lose money. Yet, stock market investing, once the research is done, is much more passive than other forms of trying to make money – in my experience, at least. Dividends roll in automatically, and stop losses, for example, can be used to sell a share when it drops to a certain level, thereby reducing risk.

Anyway, I digress. What I really want to show is a plan for creating £20,000 of passive income from investing in shares.

The passive income plan

The cornerstone of my plan for creating passive income is to invest in dividend paying shares. That’s a combination of higher yielding shares, as well as those with faster growing dividends and higher dividend cover. The mix is important, in my opinion, to reduce the risk and impact of any future dividend cuts.

On top of looking for dividend paying companies, I’d also want to invest in shares that should perform above average and not be too volatile. Therefore, I’d focus my efforts on finding companies with high margins and returns on capital and that operate in steady industries such as consumer discretionary, as opposed to banking or mining, for example, which are much more cyclical.

Is it feasible?

I think the plan is entirely feasible, even for those starting with not a lot of money. Of course, in that situation it may take longer, or require more sacrifice. But it is still achievable. If I take my headline £20,000 figure and multiply it by 25, because of the number of years I might be retired for, it indicates I need £500,000. This is just a rough number, though, and passive income can be earned all through the journey of getting there. Everyone’s  needs are different, but this can serve as a starting point for illustative purposes. 

By investing in high-quality shares for the long term, I might be able to start with a smaller amount, thanks to compounding. For example, investing about £500 a month for 30 years would bring me to the £500,000 mark. Starting with £10,000 and raising the monthly contribution by just £50 per month and using the same timeframe results in a pot of approximately £600,000. Both these assume a return of 6%, which is relatively conservative. According to spreadbetter IG Group, the FTSE 100’s annual total return has been 7.8%. The S&P 500’s return would likely be even greater.

It takes time to create a passive income as large as this, even if non-passive sources of income grow over the years. Nonetheless, I’m confident that within my working lifetime I can, with a plan and focus, create £20,000 of passive income.

Andy Ross owns no share 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.

Evraz (LSE: EVR) shares have been suffering recently, as the crisis with Russia and Ukraine escalated to full-out war this week. This has led to several sanctions on the Russian government, and as the majority of the Evraz’s operations take place in Russia and Ukraine, this is likely to have an extremely detrimental effect on the miner. Further, the turmoil in the countries is also likely to disrupt mining activities

Evraz shares are currently priced at just over 200p, which is a 60% decline over the past month. Due to this share price fall, the company now has a current dividend yield of over 30%. So, should I be buying this FTSE 100 stock?

Recent results

On Friday, the company released its full-year results, and they were extremely positive. In fact, in FY2021, revenues were able to reach over $14bn and net profits increased to over $3bn, in comparison to $858m in the previous year. This has equally allowed the company to reduce net debt to $2.6bn from $3.4bn the previous year. These results saw Evraz shares climb around 20% on the day.

Most importantly, the company has also declared an interim dividend of $0.50 per share, highlighting that it has confidence in the group’s financial position and outlook. This interim dividend alone, which will go ex on 11 March 2022, equates to a yield of 18%. This is already far higher than all FTSE 100 stocks, and it’s not even the full-year dividend. If the dividend can stay steady for the rest of the year, a dividend yield of well over 30% would be the result. This is almost unheard of.

Even so, this is a very big ‘if’. Indeed, Evraz has already warned shareholders that the impact of sanctions on Russia will disrupt the firm’s operations. War will exacerbate the situation further. As such, I highly doubt that the dividend will be able to remain at its current rates. There is even the possibility that it will be completely cut at some point.

Would I buy this FTSE 100 stock?

There are plenty of reasons to buy Evraz shares. For example, based on its recent results, the shares trade on a price-to-earnings ratio of under two. This indicates that the group is far too undervalued. Further, the upcoming dividend, which yields 18% on its own, is almost too tempting to ignore. Finally, with shareholders’ equity of over $2bn, it seems in a financially healthy position.

Yet, although I’m extremely tempted to buy, the current geopolitical tensions means that this stock is too risky for me at the moment. I feel that the company may be subject to several upcoming asset write-offs and large losses in the next few months, and this may strain the share price. As such, even despite the 20% dividend, I’m having to leave this FTSE 100 stock on the sidelines for now.

Stuart Blair 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.

Key points

• For the 2021 calendar year, operating losses narrowed to €2.7bn from €7.4bn in 2020
• Revenue is up 8.3% to €8.5bn, on a year-on-year basis
• More countries, like Norway, are completely removing pandemic-related entry restrictions

Every airline business has suffered during the Covid-19 pandemic and International Consolidated Airlines Group (LSE: IAG) is no exception. As the world shut down, passenger numbers and capacity were a small fraction of 2019 levels. As the pandemic retreats, however, I now think that this industry could be an excellent place to look for future growth. As a current shareholder, I want to know where the IAG share price is headed next. Let’s take a closer look.

Encouraging results and the IAG share price

Just last week, the company released its 2021 calendar year results. They showed that operating losses had narrowed to €2.7bn from €7.4bn the previous year. Furthermore, revenue increased by 8.3% to €8.5bn. Both of these results give me a lot of confidence that the airline industry is slowly getting back to its feet.

On a more practical front, passenger capacity increased to 58%, compared with 2019 levels, for the fourth quarter of 2021. This had risen from 43.4% in Q3 and 21.9% in Q2. What’s more, the firm anticipates that capacity will reach 85% this year.

Simply put, the results are beginning to show that people are returning to the skies in large numbers. This can only be a good thing for the IAG share price, which is currently trading at just above 151p.

The reopening of borders

This month, a number of countries stated they were removing all pandemic-related entry restrictions. One such country was Norway, and Sweden and Switzerland soon followed. Indeed, investment bank Liberum stated that it “remains optimistic” about “the relaxation of travel curbs”. It issued a ‘buy’ rating this month. 

IAG also benefited from the November 2021 reopening of the US border. The transatlantic routes flown by IAG’s airlines are estimated to be worth around $1bn per year for the company. This led Citi to favour IAG over short-haul carriers and it recommended purchasing shares in the firm in January 2022. 

The pandemic has left its mark on the airline business, however, and JP Morgan is concerned about future equity issuances. These would be to help tackle the company’s not insignificant debt pile of €13bn. I do factor this debt into my investment decision. However, I think the mass return of passengers to the skies should go some way to placing IAG back into a financially stable position.

Having owned shares in IAG throughout the pandemic, I know only too well the difficulties the firm has faced. With borders reopening, however, the situation appears to be returning to normal. Recent passenger data supports this view. I will be adding to my current holding without delay.

Andrew Woods owns shares in IAG. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 Lloyds Banking Group (LSE: LLOY) share price has been highly volatile in recent days. Eroding market confidence as Russia invaded Ukraine drove the FTSE 100 stock to its cheapest level for three months on Thursday. But it bounced back strongly on Friday to close a shade below 50p.

The Lloyds share price may have recovered strongly last week. As a consequence the bank remains 27% more expensive than it was this time a year ago. Hopes of a strong economic recovery and several profits-boosting interest rate rises have helped the bank soar in value during this time. Yet it still offers plenty of value for money on paper.

City analysts expect earnings at the bank to fall 16% year-on-year in 2022. A cooling following last year’s electrifying rebound is perhaps no surprise, however. What’s more, current forecasts leave Lloyds trading on a forward price-to-earnings ratio of just 7.9 times.

The Lloyds share price also looks dirt-cheap to me as an income investor. Analysts think the bank’s dividend will leap from 2p per share in 2021 to 2.6p in the current year. This results in a 5.2% dividend yield, one that smashes the broader 3.5% FTSE 100 average.

Profits bounce back

The bank’s full-year results last week illustrated how strongly its highly-cyclical operations have rebounded of late. Pre-tax profit jumped to £6.9bn in 2021 from £1.2bn a year earlier, Lloyds said, with net income rising 9% year-on-year to £15.8bn. Profits also benefitted from the unwinding of £1.2bn worth of loan loss charges that the bank reported during the pandemic.

As a statement of confidence looking ahead, Lloyds also raised the full-year dividend for 2021 to 2p per share. This was up significantly from 0.57p previously. And it has launched a share buyback programme of up to £2bn, too, a decision Lloyds says reflects “the strong capital position of the group”.

Is Lloyds’ share price too cheap to miss?

Lloyds was always set for a strong rebound from 2020’s pandemic-coloured lows. But my fear as an investor is whether the Black Horse Bank is beginning to run out of road. As someone who buys shares for the long haul, the possibility of more big dividends this year isn’t enough to encourage me to invest.

The UK is facing a worsening cost of living crisis as inflation heads through the roof. Consumer confidence is taking a whack and the number of businesses in distress is increasing. I think profits at Lloyds could come in much worse than analysts currently forecast, then, as economic conditions worsen and that this pressure could spill over into 2023 too.

I also wouldn’t buy Lloyds because these economic pressures could cause interest rates to rise much more slowly than bank investors might be hoping for. Last week a key Bank of England policy maker said that only a “modest tightening” of policy is likely in the short-to-medium term, dealing a further blow to Lloyds’ profits outlook.

So Lloyds’ share price is cheap. But this cheapness is a reflection of the huge problems it still has to overcome to generate strong and sustained profits growth. This is why I’d much rather buy other UK shares for these challenging economic times.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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 FTSE 250 often plays second fiddle to its more prestigious sibling, the FTSE 100. However, I think that the outlook for the smaller index looks promising for 2022.

The UK’s strong economic outlook

There are reasons to be optimistic for companies doing business in the UK. First, Boris Johnson has just announced the removal of all outstanding Covid restrictions as part of a “living with Covid plan”. This has been greeted with a positive reaction from the hospitality industry and airlines, and is likely to give our economy a boost.

Second, according to a recent report by the International Monetary Fund, the UK’s economy will expand by 4.7% in 2022. This is one of the largest annual increases among the G7 developed nations.

Focussing on the FTSE 250

I think that the index has some good companies in sectors such as travel, leisure, and retail that could make the most of the post-Covid economic recovery over the next few years. Also, whereas some FTSE 100 companies derive a lot of their earnings from outside the UK, a majority of FTSE 250 companies are more reliant on domestic economic conditions. For these two reasons, I see some significant upside potential from the stocks in the index.

Although I could pick individual shares, for my own portfolio, I think the best way of investing is with a FTSE 250 exchange-traded fund (ETF). This allows me to own all the companies in the index by holding just one share.

I’m looking at Vanguard FTSE 250 UCTIS ETF (LSE: VMID) which is a large fund, with almost £3bn in assets under management. It’s well established (around eight years old) and has a low management fee of 0.11%. This fund has both an accumulation and a dividend-paying option. Personally, I like the income stream option and the current yield is 2.55%.

Performance

At first glance, the share price performance of the ETF seems underwhelming. Over the last 12 months, it’s about flat and year-to-date down around 13%. However, most of the decline has been since January and 2022 has been a turbulent time for much of the stock market so far. I prefer to look over a longer time horizon and over the last three years, the fund’s price is up almost 7%.

One of the problems with buying an index is that I can only earn the returns of the FTSE 250. It’s certainly possible that if I could pick the right shares, then I might be able to earn a bigger return. However, I’m comfortable settling for what might be a lower return for the benefit of having greater diversification by owning the index.

Of course, nothing is certain and rising inflation and interest rates could hurt some companies’ earnings. That said, I think that the FTSE 250 has stocks in it that can still perform well in 2022 and I’m seriously considering adding this FTSE 250 ETF to my holdings as part of a balanced portfolio.

Niki Jerath 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.

The Rolls-Royce (LSE:RR) share price was hammered on Thursday as it fell over 18% on the news of CEO Warren East stepping down after nearly seven years at the helm, and showed only a small rebound on Friday morning. The FTSE 100 engine manufacturer has not only had a bad week but a bad three years, with the share price down 68% from February 2019.

Is the share price overreacting?

Some positives can be taken from the recent earnings report that show some hope for the Rolls-Royce share price. A major restructuring programme, undertaken by the departing CEO, saw a streamlining of operations with 9,000 jobs cut and unnecessary costs eliminated. This restructuring has helped Rolls-Royce turn a £4bn loss in 2020 to a small but important £124m profit in 2021.

The company has cut down on its cash-intensive operations and costs and saw only £1.5bn in cash leave the company in 2021 compared to a massive £4bn the year before. This strengthening of cash flow makes the company less reliant on taking on further debt to finance current operations and will boost future financial health.

Rolls-Royce’s power-by-the-hour business model, where airlines pay a flat rate per hour flown with Rolls-Royce engines, has harmed the company during the pandemic, with large fleets of grounded jets. However, as the travel industry prepares for a summer with loose travel restrictions, the skies will be filled once again and Rolls-Royce will be the recipient of a steady stream of income.

Further turbulence ahead for Rolls-Royce?

Rolls-Royce was forced to take on over £7bn in debt over the pandemic and sees current debt at £5.2bn, which is no small sum. As a term of some of the loans taken, Rolls-Royce is not allowed to pay a dividend until at least 2023 and I wouldn’t be expecting one until at least 2025 considering current financial instability. As a result, there are other FTSE 100 shares I’m turning to when I’m looking to boost my dividend income stream.  

The news of CEO Warren East stepping down at the end of the year understandably harmed the Rolls-Royce share price, and it could suggest some deeper concerns for the FTSE 100 giant. East trimmed down costs and made the company profitable but is now jumping ship — this could indicate a lack of direction in the senior management team.

Am I investing today?

I believe that the drop in the Rolls-Royce share price has been a slight overreaction but there are still legitimate concerns about the health of the company. The restructuring efforts, positive earnings report and a good summer for air miles all indicate brighter skies ahead.

Despite all this, I am only adding Rolls-Royce to my watch list considering the shifts in leadership, high debt, and absence of a dividend. I believe the risks outweigh potential opportunities at this moment in time.

Finlay Blair 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.