Image source: Getty Images <\/p>\n
Diversification\u2019s critical when seeking a reliable second income over time. A broad portfolio can absorb individual dividend shocks better than one containing just a handful of stocks.<\/p>\n
Spreading risk over a number of investments doesn\u2019t mean settling for inferior returns either. Take the following shares, investment trusts and exchange-traded funds (ETFs), for example:<\/p>\n
Stock<\/strong><\/p>\n Forward dividend yield<\/strong><\/p>\n<\/tr>\n Target Healthcare<\/strong> REIT<\/strong><\/p>\n<\/td>\n 8.6%<\/p>\n<\/td>\n<\/tr>\n iShares World Equity High Income ETF<\/strong><\/strong><\/p>\n<\/td>\n 9%<\/p>\n<\/td>\n<\/tr>\n Phoenix Group <\/strong>(LSE:PHNX)<\/p>\n<\/td>\n 8.5%<\/p>\n<\/td>\n<\/tr>\n As you can see, the dividend yield on each of these stocks comfortably beats the FTSE 100<\/strong> average (currently around 3.4%). It means a \u00a310,000 investment spread equally across them could \u2014 if broker forecasts are accurate \u2014 provide an \u00a3870 passive income over the next year alone.<\/p>\n What\u2019s more, a portfolio containing just these three stocks would provide (in my view) exceptional diversification. In total, these investments deliver exposure to 346 different companies spanning multiple sectors and global regions.<\/p>\n Here\u2019s why I think they\u2019re worth serious consideration today.<\/p>\n Real estate investment trust (REIT) Target Healthcare\u2019s set up to deliver a steady stream of dividends to shareholders. These entities must pay at least 90% of annual earnings out this way in exchange for juicy tax breaks.<\/p>\n By focusing on the care home sector \u2014 it owns 94 in total \u2014 this trust has exceptional long-term potential as the UK\u2019s elderly population booms. It also benefits from the sector\u2019s highly stable nature, while inflation-linked leases boost earnings visibility still further.<\/p>\n Be mindful though, that labour shortages in the nursing industry could dent future returns.<\/p>\n 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.<\/p>\n The iShares World Equity High Income ETF is focused primarily on high-yield and dividend growth stocks. In total, it holds 344 different businesses around the globe, from tech giants Nvidia<\/strong> and Microsoft<\/strong> to insurers like Axa<\/strong>, telecoms such as Deutsche Telekom<\/strong> and banks such as JPMorgan<\/strong>.<\/p>\n However, it also earns income from safe havens like cash and US Treasuries, which provides strength during economic downturns.<\/p>\n The fund\u2019s focused primarily on US shares. In total, these account for 67.8% of total holdings. I don\u2019t think this is overly excessive, but bear in mind that this could impact the fund\u2019s growth potential if sentiment towards US assets more broadly cools.<\/p>\n Story Continues <\/p>\n Phoenix Group, like Legal & General<\/strong> and M&G<\/strong>, is a highly cash-generative financial services provider. And so like those other businesses, it offers one of the three highest forward dividend yields on the FTSE 100 today.<\/p>\n In fact, Phoenix has a sound track record of beating its cash generation forecasts and providing subsequent meaty windfalls to shareholders. During 2024, total cash generation was expected at \u00a31.4bn-\u00a31.5bn. In the end it came in at a whopping \u00a31.8bn!<\/p>\n Like Target Healthcare, I believe it\u2019s well-placed to capitalise on Britain\u2019s growing older population. I\u2019m optimistic demand for its savings and retirement products will grow steadily.<\/p>\n On the downside, this year\u2019s predicted dividend is covered just 1.1 times by expected earnings. However, a Solvency II ratio of 172% could give it scope to meet analysts\u2019 dividend forecasts, even if this year\u2019s profits disappoint.<\/p>\n The post \u00a310k to invest? A UK share, investment trust and ETF to consider for an \u00a3870 second income this year<\/a> appeared first on The Motley Fool UK<\/a>.<\/p>\n More reading<\/strong><\/p>\n JPMorgan Chase is an advertising partner of Motley Fool Money. Royston Wild<\/a> has positions in Legal & General Group Plc and Target Healthcare REIT Plc. The Motley Fool UK has recommended M&g Plc and Nvidia. 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.<\/a><\/p>\n Motley Fool UK 2025<\/p>\n","protected":false},"excerpt":{"rendered":"Image source: Getty Images Diversification\u2019s critical when seeking a reliable second income over time. 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