Living off dividends?

MrE1

How much would I need invested to live off dividends? There are articles online but I'm interested to hear from real investors who have done it. My living cost is as low as £10200 per annum

refluxer

Here's a very crude calculation... the dividend yield of the FTSE 100 looks to have averaged between 3-4% each year over the last 20 years which means you'd have needed £250k to £333k invested to get £10k PA in dividends.

Don't forget that dividends over £2k not in a S&S ISA would be taxed though...

https://www.dividenddata.co.uk/ftse-index-yield.py

jimpwarsop

£300k, maybe less.

£10200 is well within your personal allowance for income tax.

https://www.gov.uk/tax-on-dividends]

Of course if this is a long term plan, you can protect your income in a ISA at an investment rate of £20k pa.

Albermarle

The problem is that shares with good dividends do not appreciate in capital value in the same way most shares do .Most people taking an income from a pension pot tend to have a mixture of income producing and growth orientated shares ( in all kinds of different proportions ) and some bonds/gilts.
From this it should be OK to safely withdraw around 3.5% pa , increasing with inflation each year. ( although exact figure is debatable ) So you need a similar size pot to as mentioned above, but I think this way you are more likely to have a bigger pot left when you are a lot older/die.

ColdIron

I live off dividends (and savings) but £10,200 pa sounds pretty grim, barely above state pension. 20 years or so at this level of income would be a poor reward after a lifetime of working. You should set your sights higher than a subsistence amount. Do you have an emergency fund for, well, emergencies? What about holidays, new car, new kitchen etc

Dazed_and_C0nfused

refluxer said:

Here's a very crude calculation... the dividend yield of the FTSE 100 looks to have averaged between 3-4% each year over the last 20 years which means you'd have needed £250k to £333k invested to get £10k PA in dividends.

Don't forget that dividends over £2k not in a S&S ISA would be taxed though...

https://www.dividenddata.co.uk/ftse-index-yield.py

Based on the implication in the op the poster wouldn't be able to benefit from the dividend nil rate of tax (aka dividend allowance) as their only income would be £10,200.  So all covered by their Personal Allowance.

How much would I need invested to live off dividends? 

Prism

One problem with taking an income solely from dividends of that you are not in control. For example lets say this years inflation averages at around 5%. That would require the equities or funds you are invested in to also increase their dividends on average by 5%. There is absolutely no guarantee that they will do that and therefore you may find yourself worse off over time. 

Someone will likely come along and tell you about certain trusts that pay an increasing higher dividend. Non of these guarantee to match inflation either as they can't produce more than the companies they hold without selling some capital.

As of the end of Jan 2022 the all world index was paying a dividend of 1.6% and the higher yield version was 3.1%.

MrE1

Thank you for all your help and comments guys (and anyone else who later contributes)

coastline

The FTSE has underperformed in recent years but set the chart to 1986 and we get a different picture. Not that you'd have all your eggs  in one basket ?

Chart Tool | Trustnet

A yield of 3.25% in1985 and the index was launched at 1000. So dividend of £32.50p.

FTSE-100-Dividend-yield-over-30-years-2015-05.png (605×341) (ukvalueinvestor.com)

Today FTSE at 7155 and yield of 3.77%. In pounds £269.74p

Dividend Yields - FTSE 100 (dividenddata.co.uk)

Inflation of £32.50 from 1985 to 2021 comes in at £103 . Dividend today £269.

Inflation calculator | Bank of England

Audaxer

MrE1 said:

How much would I need invested to live off dividends? There are articles online but I'm interested to hear from real investors who have done it. My living cost is as low as £10200 per annum

You would probably need £250k to £300k. If looking for dividends that have a long history of increasing with inflation, have a look including some of these investment trusts:
Dividend heroes | The AIC

soulsaver

I get c. £10k div income pa from £200k from a few fairly safe shares, which I use as an alternative to cash eroding by inflation  in the bank .

But I couldn't imagine relying on them/it as my only source of income.