Who doesn’t like the concept of getting paid to do nothing? I’m at all times exploring methods to generate passive earnings and I feel high-quality UK shares might be the reply.

With a few years forward of me till retirement, I’ve began enthusiastic about supplementing my wage with different types of earnings. A type of that has piqued my curiosity is a gradual stream of dividends for the years forward.

If I’m going to purpose for £10,000 per 12 months in passive earnings, I would like it to be from dependable dividend payers (or at the least traditionally so) which might be in non-cyclical industries in a position to hopefully climate market cycles.

One large-cap inventory that ticks the field

I’ve been honing in on the bigger finish of the market. I like FTSE 100 shares which might be business leaders and have sturdy monitor information of delivering a stable dividend yield to buyers. The Footsie itself has a 3.7% annual yield, so ideally I’d wish to obtain larger than that.

One title particularly that caught my eye is Nationwide Grid (LSE:NG). It is likely one of the world’s largest publicly listed utilities, centered on transmission and distribution of electrical energy and gasoline.

I like the commonly secure and defensive profile of utilities corporations. There may be normally sturdy demand for electrical energy and gasoline regardless of the ebbs and flows of the economic system.

Granted, there are some medium and long-term challenges from the power transition enterprise, however I feel massive entities like Nationwide Grid are well-positioned to pivot as required.

Nationwide Grid as a passive earnings prospect

Shares within the utilities group fell in Might on the again of its full-year outcomes. The corporate introduced a 7-for-24 rights concern that did take buyers unexpectedly.

That rights concern will affect the corporate’s present 6.2% dividend yield with the dividend funds unfold throughout a better variety of shares. Nevertheless, the expected yield continues to be forecast to be round 5.7% per 12 months. 

Nevertheless, my funding horizon for a possible passive earnings play is trying ahead at the least 5 years, so I’m not as involved by near-term volatility.

Based mostly on that estimated 5.7% yield, I can work out how a lot I would wish to speculate to make £10,000 per 12 months in passive earnings.

That magic determine is £175,439 invested. Based mostly on the present Nationwide Grid share price of 918p, that equates to 19,111 shares.

Potential pitfalls

Whereas all of this sounds nice in idea, there are clearly dangers concerned. For one factor, dividends are discretionary. Boards are usually reluctant to scale back them, nevertheless it does occur.

Extra particularly for Nationwide Grid, I’m their debt burden. The corporate has £43bn of debt on its steadiness sheet because it continues to spend money on future development.

Nevertheless, the upper rate of interest setting is actually an element relating to money circulation. The extra cash that’s wanted to service massive debt balances, the much less that’s accessible as free money circulation for shareholders.

One for the longer term

I’m taken with constructing a diversified portfolio that may ship my goal passive earnings. Nationwide Grid is only one of many dividend shares that would assist me try this.

Whereas I don’t have the cash to speculate simply now, it’s actually on my radar as I work in direction of that £10,000 determine.