With £2,000 to invest, I’d likely buy two FTSE 100 stocks to achieve a bit of diversification. And that’s especially true if the money was my first investment. Then, with later sums, I’d aim to diversify further into more FTSE 100 shares.
Building a portfolio of FTSE 100 shares
Ideally, I’d prefer to set up regular monthly investments into a share account, such as a Stocks and Shares ISA. And the idea would be to build up my investments over time.
So I’d aim to diversify across several stocks with as many as between five to 20 positions in my portfolio.
And there are several FTSE 100 shares with big dividends right now. For example, with the share price at 893p, energy company National Grid (LSE: NG) has a forward-looking yield of around 5.7%.
In May, chief executive John Pettigrew said: “National Grid has… numerous opportunities in the UK and US to provide energy security and support the delivery of net zero.”
And the firm’s key position in energy infrastructure has delivered a reassuring trading and financial performance over recent years.
I like the way the steady cash flow has supported a progressive dividend policy with the shareholder payment generally rising a bit each year. However, the business is heavily regulated and tends to require much capital investment. And one of the outcomes of those conditions is that National Grid has accumulated a large pile of debt.
It’s possible that future regulatory requirements could compromise the company’s ability to maintain rising shareholder dividend payments. Nevertheless, I’d be keen to research the company with a view to adding some of the shares to my portfolio.
A strong player in renewables
But I’d also like to continue the energy theme in my portfolio with an investment in SSE (LSE: SSE). The company has emerged as a strong player in the modern renewable industry. And I reckon the business has much potential.
It’s been engaged in a programme of disposing of non-core businesses and reshaping the company for growth. But I don’t have to wait for the full potential to be realised. That’s because there’s a handy dividend to collect in the meantime.
In July, finance director Gregor Alexander said the company has ” an enviable offshore wind pipeline which we are seeking to expand and diversify.”
SSE also has “options” to develop new thermal and pumped storage hydro technologies. And Alexander sees significant growth potential for asset values in the firm’s regulated electricity businesses.
Meanwhile, with the share price near 1,577p, the forward-looking yield for the trading year to March 2023 is running near 5.4%. I see that valuation as attractive.
But the company’s renaissance as a renewables champion is quite young. Indeed, the firm recently rebased its dividend lower as it reshapes. Perhaps there could be further bumps ahead for the business.
However, City analysts forecast rises in the shareholder payment and I think the firm’s growth plans are interesting. So, I’d embrace the risks and research this opportunity with a view to adding some of the shares to my portfolio.
The post With £2,000 to invest, I’d buy these FTSE 100 shares with big dividends appeared first on The Motley Fool UK.
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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended National Grid. 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.