For 18 months and more, my wife and I have been building a new stock portfolio. Our goal was to create a pot designed to dramatically boost our passive income using share dividends.
Of course, we could ‘fire and forget’ this fund, leaving it alone to do its job over the years. However, I prefer to keep a close eye on our financial assets, especially when markets get lively.
Two shares with delicious dividends
At present, our income portfolio contains 15 different FTSE 100 shares and five FTSE 250 stocks. We bought each of these shareholdings for its juicy passive income. For example, here are two of the highest-yielding holdings in our latest portfolio.
1. Vodafone
We bought into telecoms firm Vodafone Group (LSE: VOD) in December 2022, paying 90.2p a share for our holding. At first, the share price strengthened, closing at 102.76p on 20 February 2023. Alas, it’s been downhill almost ever since.
As I write, the shares trade at 66.96p, valuing this business at £18.2bn — a small fraction of its peak worth. But sustained falls in its share price has pushed Vodafone’s cash yield through the roof.
Today, this Footsie stock offers a whopping dividend yield of 11.5% a year, the highest in its index. The bad news is that double-digit yields rarely last. Indeed, the group may cut future dividends so as to tackle its net debt of €36.2bn (£30.9bn).
To date, we are nursing a paper loss of more than a quarter (-25.8%) of our initial investment. However, I have high hopes that CEO Margherita Della Valle can deliver on her turnaround plan. Ideally, I’d like to see rising revenues, profits, and cash flow from Vodafone in 2024/25.
Then again, Vodafone has been a graveyard for value investors for many years. Its shares are down 28% over one year and have crashed 51.7% over five years. But with inflation-plus price hikes for bills coming this spring, I’m optimistic that this former giant can turn the corner.
2. M&G
M&G (LSE: MNG) is another stock we bought for its market-beating dividends. This was one of our more recent purchases, as we bought in August 2023 for 199.6p a share.
Currently, the shares hover around 224.8p, valuing this investment manager at £5.3bn — a relative FTSE 100 lightweight. But they are well above their 52-week low of 168.35p, hit on 20 March 2023 during a short-lived US banking crisis.
Why do I like M&G? Two reasons. First, its business is fairly simple to understand. Founded in 1931, M&G today manages financial assets worth £342bn on behalf of 5m individual investors and 800+ institutional clients.
Second, with a dividend yield approaching 8.9% a year, M&G shares funnel a torrent of cash to its patient owners. And with plenty of excess capital on its balance sheet, I expect this to continue.
Of course, asset managers’ fortunes are closely tied to the health of capital markets. For example, when share and bond prices crashed in 2022, M&G stock took a beating. Also, while its shares are up 10.9% over one year, they have gained under 1% since listing in London in October 2019.
Summing up, I’m hoping for plenty more passive income from M&G in the years to come!
