Is 2026 a once-in-a-decade chance to generate passive income AND growth?

2025 was a good year for many investors using UK stocks to help build themselves a passive income. The FTSE 100 Index registered a 22% calendar year gain and finished the year near an all-time high with a number of top dividend shares surging higher.

So, after a bumper last 12 months, it got me wondering if 2026 could again be a great year for those seeking both passive income and growth.

2025 was a rare year

In 2025, the Footsie delivered one of its strongest years in decades, with share prices climbing and dividends still flowing. For once, investors seemingly did not have to choose between income and growth.

Total payouts from UK-listed companies remained high, with the indexâs average 3.2% dividend yield above many other global markets. At the same time, a long period of subdued UK valuations came to an end.

That was due to a combination of investor positivity, changing interest rate expectations, and some speculation on unloved sectors.

Dividend shares were at the heart of this. Instead of simply providing steady income, many of them also produced very healthy capital gains.

Is 2026 a once-in-a-decade opportunity?

That mix of strong capital gains and still-generous dividend yields is something UK investors have rarely seen together in the same year. It might even prove to be a once-in-a-decade window to lock in attractive passive income at reasonable valuations.

NatWest Group (LSE: NWG) is a good example. The bank combined meaningful cash dividends with an active share buyback programme, supported by solid profits and a strong balance sheet.

For investors, that meant regular income plus the potential for a higher share price as earnings were spread across a shrinking share count. The stock’s current yield of 3.8% is certainly nothing to sneeze at.

On simple valuation measures such as the price-to-earnings (P/E) ratio, NatWest still does not look stretched. The bankâs trailing P/E ratio of 10.2 is cheaper than both HSBC (17.2) and Lloyds (15.3), let alone peers further abroad.

There are clear risks, though. NatWest remains heavily exposed to the UK economy, the housing market, and changes in regulation or tax policy. Any deterioration in its loan book, or a weaker outlook for interest margins, could squeeze both profits and future dividends. That is the trade off that investors need to consider with almost every high-yielding share.

Could 2026 be another chance?

One reason the UK looked so appealing in 2025 is that the Footsie is far more global than some headlines might suggest.

A large majority of its constituentsâ revenue comes from outside the UK, across sectors such as energy, healthcare, consumer goods, and banking. That overseas earnings base can cushion profits from local economic worries and help keep dividend streams resilient.

After such a strong year, 2026 is inevitably uncertain. Markets have already moved higher and there is always the risk of earnings disappointments or dividend cuts if the global backdrop worsens.

Even so, the evidence from 2025 shows that UK stocks can still offer both yield and growth. While nothing is guaranteed, 2026 could be an opportunity for investors who are trying to build passive income portfolios that also have room for share prices to climb.

The post Is 2026 a once-in-a-decade chance to generate passive income AND growth? appeared first on The Motley Fool UK.

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Ken Hall has no position in any of the shares mentioned. HSBC Holdings is an advertising partner of Motley Fool Money. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group 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.