Investing in blue-chip shares that I think will pay me dividends in future can be a good way of boosting my passive income. If I had a spare £4,000 to invest this month and wanted to buy a handful of FTSE 100 shares to try and earn meaty dividend income, I would split it evenly across the following four.
Legal & General
With a very well-known brand, large long-term customer base of pensions clients and deep financial expertise, I think Legal & General offers me the prospect of sizeable dividends.
At the moment the shares yield 7.9%. Over time, I think the dividends could grow.
In recent years, they have increased by around 5% annually. The board has said it hopes to continue increasing them, at least in the short term. Longer term, if the business does well, I think that could continue.
Dividends are never guaranteed and Legal & General faces risks, such as a market route hurting returns, leading to lower profits.
But it is the sort of high-yielding FTSE 100 share I would happily hold in my portfolio.
Phoenix
Another blue-chip share I would happily own is Phoenix. Like Legal & General, its financial services business – conducted through providers it owns including Standard Chartered – is well-established and benefits from a sizeable base of existing customers.
That does not mean it is all smooth sailing. One concern I have is that challenging market conditions could lead to an outflow of customer funds, hurting revenues and profits.
Nonetheless, I like Phoenix’s proven ability to generate sizeable cash. I also like the dividend, which grew at the interim stage and now yields 9.9%.
M&G
Another FTSE 100 share in the financial services sector I already own but would be happy to buy more of is asset manager M&G.
Like Phoenix, its dividend grew last year. The yield now stands at 8.8%.
I think the firm’s combination of a well-established brand and wide customer base across a diverse range of markets combined with robust demand for asset management services over the long run should help the business do well.
As with Phoenix, one risk I see is an unstable economy reducing client fund inflows and profits. Over the long-term though, I am happy owning M&G in my portfolio and think it has substantial future dividend potential.
Vodafone
Is Vodafone headed for a dividend cut? After all, FTSE 100 shares selling for pennies and offering a yield of over 11% dividend yield are highly unusual. The telecom giant’s debt pile and shrinking business footprint after recent disposals could both threaten the sustainability of its dividend.
Set against that though, the company markedly reduced debt last year, has a strong position in many markets, and could benefit from ongoing high growth of mobile money in developing markets.
A cut is always possible, but I remain happy owning Vodafone.
Ongoing dividend income streams
Investing £1,000 into each of these four FTSE 100 shares ought to earn me around £603 in annual dividend income.
That could fall if there is a dividend cut or cancellation. But three of the four actually raised their shareholder payouts last year.
