These super shares pay passive income of £27bn a year!

In my relentless search for growing passive income, I’ve found five stocks paying bumper dividends. For example, one sends over £9bn a year to its owners.

| More on:
Passive income text with pin graph chart on business table

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As an older investor, my family portfolio is safer than when I was a younger man. Today, it includes many dividend stocks to generate high levels of passive income.

Over time, my wife and I intend to entirely replace our earnings with unearned income, largely from two main sources. First, state, company and personal pensions. Second, from a balanced, diversified portfolio of dividend shares.

I love FTSE 100 dividends

But one problem with future dividends is that they’re not guaranteed, so can be cut or cancelled without warning. Another big problem with cash dividends is that most companies listed on the London stock market don’t pay them.

In some cases, loss-making companies don’t have the funds to pay out cash to their shareholders. Other firms prefer to reinvest their profits into boosting future growth. Either way, these businesses don’t provide my family with the passive income we seek.

Then again, almost all members of the UK’s elite FTSE 100 index do pay dividends to their owners. That’s why the Footsie is my happy hunting ground for juicy dividend stocks.

Five dividend Goliaths

For example, the five companies listed in the table below all pay out massive cash sums to their shareholders. Here they are, sorted from largest to smallest by market value:

CompanySectorMarket valueShare priceDividend yieldOne-year change*Five-year change*Yearly dividend
ShellOil & gas£161.1bn2,494p4.1%0.5%6.5%£6.6bn
AstraZenecaHealthcare£158.4bn10,220p2.2%-8.8%61.8%£3.5bn
HSBC HoldingsBanking£114.1bn597.2p8.0%-5.2%-2.9%£9.2bn
UnileverConsumer goods£100.0bn4,002p3.7%-4.6%0.5%£3.7bn
BPOil & gas£79.3bn466.1p4.8%-14.8%-13.0%£3.8bn
*These returns exclude dividends.

For the record, these are the Footsie’s five largest businesses. The largest is worth over £160bn, while the smallest is worth almost half that. In other words, these are the big beasts of the UK stock market.

As a result of their size, dividend payouts from these five groups are huge, ranging from £3.5bn a year to £9.2bn a year. Across all five businesses, the total yearly dividend comes to a whopping £26.8bn.

Total FTSE 100 dividend income for 2024 is forecast to be £83.7bn. Therefore, these five giants could pay out almost a third (32%) of total Footsie dividends this calendar year. Wow.

I like this stock

For the record, my wife and I bought one of these stocks six months ago for its impeccable history of paying out passive income. The company in question is consumer goods colossus Unilever (LSE: ULVR).

Unfortunately, our timing was hardly ideal when we bought into this £100bn Anglo-Dutch behemoth last August. We paid 4,122.2p a share, but the stock then dived, hitting a 52-week low of 3,671.5p on 23 January.

The mega-cap stock has since rebounded strongly, closing at 4,002p on Friday (23 February). The shares now deliver a dividend yield of 3.7% a year, just below the FTSE 100’s yearly cash yield of 4%. But Unilever has a long record of steadily lifting its dividends.

Granted, the business had a tough 2022-23 due to falling sales growth and margin shrinkage. And growth this year could be below-trend. Still, I’m hopeful of higher revenues, profits and cash flows in 2024-25. Hence, we intend to hang on to our holding for many years for its passive income!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Cliff D'Arcy has an economic interest in BP and Unilever shares. The Motley Fool UK has recommended AstraZeneca, HSBC Holdings, and Unilever. 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.

More on Investing Articles

Investing Articles

2 tempting cheap shares to consider buying for long-term returns and growth

These cheap shares are being held back by wider market issues. Buying some now could be a shrewd move ahead…

Read more »

Investing Articles

Could Premier African Minerals be a millionaire-maker penny stock?

Shares of Premier African Minerals (LSE:PREM) have crashed over the past year. Is this a golden opportunity for me to…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Which FTSE defence stock should I buy? Here’s what the charts say

FTSE shares like BAE Systems have been flying higher over the last couple of years as the geopolitical situation has…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Here’s why investors should consider buying Scottish Mortgage shares today

After a steady rise in recent times, this Fool thinks Scottish Mortgage shares could be worth considering. Here he explains…

Read more »

Young black man looking at phone while on the London Overground
Growth Shares

This FTSE 250 stock keeps blowing broker forecasts out of the water

Jon Smith considers the ever-increasing share price targets for a FTSE 250 stock that has risen by 120% in the…

Read more »

A mixed ethnicity couple shopping for food in a supermarket
Investing Articles

Marks and Spencer shares could rise 29%, according to this broker

Marks and Spencer shares currently sport a P/E ratio of just 10, and one well-known City broker believes the company…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 of the best FTSE 100 beginner stocks to consider buying

The Footsie offers people just beginning their investment journey some of the best stocks to buy. Here are two to…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Here’s why the Aviva share price suddenly dived

The Aviva share price suddenly dropped by over 6% the other day. But there's a simple explanation for this sudden…

Read more »