Buying 750 Phoenix shares generates a passive income of…

Among all its peers in the FTSE 100, Phoenix Group (LSE:PHNX) shares take the crown when it comes to dividend yield. The evolving insurance enterprise offers a massive payout of 8.3%, enabling investors to instantly unlock a pretty substantial hands-free income stream overnight. What’s more, if analyst projections are accurate, today’s chunky yield could be set to grow even further over the next couple of years.

So how much money could investors start earning if they buy 750 shares today for £4,930?

Calculating income

Last month, the company paid its final dividend for its 2024 fiscal year. Combined with the interim dividend from October last year, the total dividend per share currently sits at 54p. So for those holding 750 Phoenix shares in their portfolios, that translates into a passive income of £405 – not bad considering the original cost of investment.

However, as previously stated, this might simply be the tip of the iceberg when looking at analyst forecasts.

Fiscal Year	Dividend Forecast	Forward Yield	Dividend Income From 750 Phoenix Shares
2025	55.55p	8.45%	£416.6
2026	57.1p	8.68%	£428.3
2027	58.7p	8.93%	£440.3
2028	60.3p	9.17%	£452.3
2029	61.9p	9.41%	£464.3

If these projections are correct, investors can expect their dividend income to grow by an average of 3.5% a year between now and 2029. That’s comfortably ahead of normalised inflation – a handy advantage for investors relying on dividend income for everyday expenses such as retirees.

But it’s not just pensioners set to benefit here. Over the last 12 months, Phoenix’s shares shave climbed almost 35% as earnings ramped up. And some institutional investors appear to be optimistic that further capital gains could lie on the horizon.

Digging deeper

A big part of Phoenix’s ability to pay chunky dividends is its impressive cash generation. In fact, operating cash flows expanded by 22% in 2024 as demand for its financial products continued to rise. But it’s not just dividends receiving some TLC.

The company’s blown past its debt reduction targets, deleveraging its balance sheet at a much faster-than-anticipated rate. And even in 2025, another $250m’s been wiped out, boosting the group’s Solvency ratios in the process. That means less money’s wasted on paying interest and is instead allocated to securing future growth investments as well as rewarding shareholders.

However, there are still a few weak spots. Management’s strategy to move away from life insurance and towards pension and annuity products has been quite lucrative so far. But it also exposes the bottom line to a much higher level of interest rate sensitivity as well as longevity risk.

If rates fall sharply or customers end up living longer than expected, the quality of Phoenix’s earnings will likely suffer. And the impact of this could be much higher compared to its peers like Aviva and Legal & General, which have far more experience navigating the full-service insurance market.

The bottom line

The high yield of Phoenix shares is a reflection of the risk associated with this business. Having only recently started to pivot away from life insurance, management’s yet to prove it can sustainably compete with other industry titans. But, given the potential rewards on offer, investors may want to consider investigating further.

The post Buying 750 Phoenix shares generates a passive income of… appeared first on The Motley Fool UK.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.