Creating a passive income stream essentially means making money without having to do any work — or at least not having to do additional work after it’s set up.
By investing in FTSE 100 shares with solid dividend yields, I can generate passive income without having to do much other than hold the investment. That said, I would always consider the long-term growth prospects of the share, as well as the yield. I think there’s little point in generating those yields if the value of the investment goes down.
With that considered, here are two Footsie shares I’d buy today. I see them both as stable and able to generate impressive dividends.
Legal & General
As a growth investor, I look to buy companies with strong and stable track records. I also like to see a business model with steady demand. FTSE 100 insurer Legal & General Group (LSE:LGEN) ticks a lot of boxes for me.
The LGEN share price has recovered well since the beginning of the Covid-19 pandemic. However, it still trades 17% down compared with last February.
Regardless of previous performance in the market, I’m really encouraged by the insurance firm’s profit guidance. Legal & General says its operating profit for 2020 is expected to be the same as 2019. While it’s not growth, given the year that it was, I don’t see it as a bad result.
What is more worrying is the company’s dividend news. Legal & General announced late last year that the dividend would remain flat and not increase as had been previously expected.
However, the current dividend still provides a yield of just under 7% — a very attractive prospect. As part of the same update in November, Legal & General also detailed a five-year plan to return to dividend growth from 2021. This supports my assessment that the insurance giant is a stable, well-managed outfit.
Vodafone
Another popular income stock I’d consider adding to my portfolio or Stocks and Shares ISA is telecommunications provider Vodafone Group (LSE:VOD).
It’s another FTSE 100 share that has recovered during the most recent stock market rally, with its share price rising more than 26% in the last three months. That said, in the last 12 months it has lost around 8% of its value.
Vodafone has a price-to-earnings ratio (P/E) of 27, which a lot of investors may consider to be too expensive. However, with a dividend yield of almost 6% the company continues to provide one of the best payouts to investors in the Footsie.
But how has business been for Vodafone? In a trading update last week, the company announced it had returned to service growth after strong performance in its biggest market, Germany.
Organic service revenue rose to €9.36bn (£8.3bn) in the three months to the end of December. This 0.4% rise mirrored a 0.4% drop in the previous quarter. There were declines in some other markets, particularly in Italy, where operating profit fell 7.8% for the quarter.
But I see enough value in Vodafone’s dividend, in addition to a return to growth in its biggest market, to see it as a solid income stock.