Forget Bitcoin! I’d rather buy FTSE 100 stocks and aim for decades of passive income

Investing in FTSE 100 stocks isn’t going to make me a millionaire overnight. Just as importantly though, London’s blue-chip index isn’t likely to disappear in a puff of smoke like some cryptocurrencies have.

For me, that makes it an ideal vehicle for building rising passive income over the long term.

My problem with Bitcoin is that it doesn’t produce anything. Sure, I may make money trading it — the digital coin is up 75% this year — but it doesn’t generate any cash flows. Therefore it cannot pay me an income.

As Warren Buffett remarked: “Bitcoin has no unique value at all…You can stare at it all day and no little Bitcoins come out“.

The test of time

I have absolutely no idea which cryptocurrencies (if any) will still be around in a few decades’ time. But I can make some assumptions about the types of businesses that will still be relevant.

For instance, I think it’s safe to assume that people will still be drinking alcohol. Humans invented it in separate locations thousands of years ago — ancient China, the Caucasus, and the pre-Columbian Americas.

Now, we don’t know for certain which types of alcohol will remain popular. Take mead, the ancient drink created by fermenting honey with water, as an example. It was one of the world’s most widely consumed alcoholic beverages for centuries. Today, however, I don’t see much mead down the drinks aisle in Tesco.

Still, I’m going to stick my neck out and say that gin, rum, vodka, and whisky will remain popular for a good while yet. That leads me to believe that FTSE 100 drinks giant Diageo is likely to stand the test of time.

A quick glance at some of its 200+ brands strengthens my belief.

The stock carries a 2.1% yield today. While that’s below the FTSE 100 average, Diageo has been increasing its dividend for over two decades now.

In the short term, the spirits producer could experience a slowdown in sales as the global economy weakens. But long term, I reckon the company has enough pricing power and untapped growth potential to carry on rewarding shareholders for many years.

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Rising passive income

No single dividend payment is ever truly guaranteed. But it’s reassuring to me when I consider the recent dividend per share increases of my own top four FTSE 100 stocks.

The fact that these payouts kept flowing during the turbulent years of the pandemic is impressive. It reveals the resilience and, I’d argue, importance of each company.

For example, BAE Systems manufactures arms and provides defence capabilities, which is unfortunately very relevant today. And National Grid is a regulated monopoly operating the energy transmission networks in the UK.

Meanwhile, Legal & General manages pensions and assets and provides insurance. The stock carries a massive 7.8% yield right now!

I’d much rather have these FTSE 100 stocks in my portfolio than Bitcoin for the next few decades.

The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

The post Forget Bitcoin! I’d rather buy FTSE 100 stocks and aim for decades of passive income appeared first on The Motley Fool UK.

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Ben McPoland has positions in BAE Systems, Diageo Plc, Legal & General Group Plc, and National Grid Plc. The Motley Fool UK has recommended Diageo Plc and Tesco Plc. 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.

Motley Fool UK 2023