How much will you need in a Stocks and Shares ISA to reach your target passive income of £1,370?

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I have a stocks and shares ISA because I like the idea of making money by doing very little. How? Well, many UK companies pay dividends and this is a distribution of profits to shareholders.

They can be treated as a “thank you” for the investment.

Is it worth buying Supermarket Income REIT Plc shares today?

Before you make a decision, please take a moment to read this report. Despite ongoing uncertainty from US tariffs to global conflicts, Mark Rogers and his team believe that many UK shares are still trading at significant discounts, offering many potential learning opportunities for experienced investors.

That’s why this could be the perfect time to conduct this valuable research – Mark’s analysts have combed the markets to discover his 5 favorite long-term “buys”. Please do not make any essential decisions before watching them.

However, let’s assume that someone wants to retire at 55 and live on dividends equivalent to half the average (median) salary in the UK. Is it really possible to achieve an annual passive income of £16,455, which equates to £1,370 per month? I think so.

Let me explain.

The biggest and the best

Some of the most reliable dividend payers can be found on the website FTSE100. But there are significant differences. The profitability of the entire index is 3.1%. However, currently (June 7) there are 13 of them paying 5% and more. In fact, eight of them return at least 6%.

With a portfolio of dividend shares yielding 5%, you would need an ISA index of £329,100 to generate an income of £16,455. At 6% this falls to £274,250.

But how could anyone go about building an ISA worth so much? Let’s see.

Some numbers

Over the 20 years to April, the FTSE 100 index generated an average annual return of 6.4%. This assumes that the dividends were reinvested to buy more shares.

Someone who invested £5,000 a year and achieved a growth rate of 6.4% would build a Stocks and Shares ISA of £308,863 after 25 years. To achieve our target annual income of £16,455, you would need a portfolio of shares with a 5.3% dividend yield.

We have seen that there are many FTSE 100 shares currently offering attractive returns, but there are many more of them on the UK share market. In fact, there are 127 of them FTSE All-Share index with a yield of 5.3%+.

It pays to shop

The one I have in my ISA is this Supermarket Income REIT (LSE:SUPR). It owns a £2.1 billion portfolio of vast grocery stores in the UK and France, which it rents to prime tenants on long-term leases.

Please note that tax treatment depends on each client’s individual situation and may change in the future. The content of this article is for informational purposes only. It is not intended to be and does not constitute any form of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

It currently offers a profitability of 7.5%. Owning £308,863 worth of company shares would generate a dividend of £23,165 per year. While this may sound attractive, it is essential to have a diversified portfolio of stocks.

This is because dividends are likely to fluctuate with profits. This potential volatility means that payouts are never guaranteed. Indeed, Supermarket Income’s profits could be at risk if interest rates remain higher for an extended period of time – the company had loans worth £980m as of March 31 – and if it struggles to let one or more of its properties.

Good balance

However, since listing in July 2017, Supermarket Income REIT has increased its dividend every year:

FY18 – 17:50
FY19 – 5.63p
FY20 – 17:80
FY21 – 5.86p
FY22 – 5.94p
FY23 – 18:00
FY24 – 6/06p
FY25 – 6/12p
FY26 – 6.18p (current target)

Additionally, it has never had bad debt and currently enjoys 100% occupancy. Most importantly, I believe grocery stores are here to stay. Whether people shop in-store or online, vast supermarkets remain an crucial part of the industry’s business model.

For these reasons, I believe Supermarket Income REIT is an excellent dividend stock to consider for those looking to enhance their passive income.

Should you invest £5,000 in Supermarket Income REIT Plc now?

If investing expert Mark Rogers and his team have stock advice, it can pay to listen. After all, Twelfth Magpie’s flagship Share Advisor newsletter, which it has run for almost a decade, provides thousands of paying members with the best share recommendations from across the UK and US markets.

Mark believes there are 6 standout stocks that investors should consider buying right now. Want to see if Supermarket Income REIT Plc is on the list?

James Beard owns shares of Supermarket Income REIT.