Investors can target £17,497 in yearly passive income from 2,958 shares in this 8%-yielding FTSE 100 dividend star — here’s how
One of my standout passive-income stocks remains Phoenix Group Holdings (LSE: PHNX). Passive income is money made with little effort on the part of the investor, of course.
From 2020 to 2024 inclusive, it respectively generated annual average dividend yields of 6.8%, 7.5%, 8.3%, 9.8%, and 10.6%.
Over the past year, its dividend yield has fallen somewhat. This is because a stockâs yield moves in the opposite direction to its price. And in Phoenixâs case, its price has jumped 42% from its 13 January one-year traded low of £4.75.
Nonetheless, it is still yielding 8% — more than double the current FTSE 100 average of 3.3%. It is also considerably more than the present ârisk-free rateâ â the 10-year UK government bond yield â of 4.4%.
Whereâs the divided yield headed?
It is growth in earnings (or âprofitsâ) that drives any firmâs dividends (and share price) over time.
A risk to Phoenixâs is that the tough competition in its sector could cause its profit margins to contract.
However, analysts forecast that its earnings will grow a stunning 106% a year to end-2027.
In tandem with this, consensus analystsâ projections are that its dividend will rise to 55.5p this year. Next year the forecast is for 57.1p and in 2027 it is for 59p.
These would generate respective yields of 8.2%, 8.4%, and 8.7%.
How do the companyâs fundamentals look?
Unbeknown to many, Phoenix Group Holdings is the UKâs largest long-term savings and retirement group, with over 12m customers.
The reason for its relative obscurity is that it trades under much better-known brands, such as Standard Life. However, in March next year the firm will officially change its name to this more recognisable name.
Its other big brands â Phoenix Life, ReAssure, and SunLife â will operate under the new corporate name from that point too.
In any event, the businessâs recent results have looked excellent to me.
Its H1 2025 numbers saw IFRS adjusted operating profit rise 25% year on year to £451m. Operating cash generation â which can be a major growth driver in itself â increased 9%. And the interim dividend was raised by 3% to 27.35p.
Phoenix added that it remains on track to achieve a 2024-2026 total cash generation target of £5.1bn, with £2.6bn of this already achieved.
It is also on target for a 140%-180% shareholder capital coverage ratio range, with presently stands at 175%.
And it remains on course to make around a £1.1bn IFRS adjusted operating profit in 2026.
How much passive income can be made?
Investors considering the stock could buy around 2,958 shares with a £20,000 investment now.
On an average yield of the current 8%, this would make £24,393 in dividends after 10 years.
This also presupposes that the dividends are reinvested in the stock. This is a standard investment practice known as âdividend compoundingâ.
On the same basis, this would rise to £198,715 after 30 years.
The total value of the holding at that point (with the initial £20,000 investment included) would be £218,715.
And that would generate a yearly passive income â from dividends â of £17,497.
Given its strong business fundamentals, stellar earnings growth prospects, and very high dividend yield, I will buy more of the stock very soon.
The post Investors can target £17,497 in yearly passive income from 2,958 shares in this 8%-yielding FTSE 100 dividend star — here’s how appeared first on The Motley Fool UK.
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Simon Watkins has positions in Phoenix Group Plc. 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.
