As an older investor, I don’t take too many risks nowadays. Today, my family portfolio delivers two things: capital growth (from US stocks) and passive income (from UK shares).
I love unearned income
Currently, our portfolio generates thousands of pounds in monthly cash, but we need this stream to keep growing. Of course, there are plenty of ways to generate passive income.
I could rent out property — possibly lucrative but too much hassle for me. I could earn cash interest — safe, but too boring. I could buy fixed-interest bonds and collect their coupons (interest) — also not for me.
I love share dividends
My favourite way to generate passive income is by owning dividend shares. These stocks pay out regular cash to their owners, usually quarterly or half-yearly.
One problem is not all companies pay dividends. Indeed, most London-listed shares don’t pay out cash to shareholders. Instead, some reinvest their profits into future growth while others make losses.
Another snag is that future dividends aren’t guaranteed so can be cut or cancelled without notice. This has happened to me before, most notably during 2020-21’s Covid-19 crisis.
I love huge payouts
In 2024, total FTSE 100 dividends are forecast at around £83.7bn. However, UK dividends are very concentrated, with a few massive companies paying out the lion’s share.
As this table shows, more than half of Footsie dividends come from just 10 vast businesses. Here they are, listed from the largest to smallest by size:
| Company | Business | Market value | Share price | Dividend yield | One-year change | Five-year change | Yearly dividend |
| Shell | Oil & gas | £160.7bn | 2,494.5p | 4.1% | -2.7% | 6.1% | £6.6bn |
| AstraZeneca | Healthcare | £155.9bn | 10,080p | 2.3% | -6.8% | 63.0% | £3.5bn |
| HSBC Holdings | Banking | £116.6bn | 612.8p | 7.8% | -4.3% | -0.2% | £9.1bn |
| Unilever* | Consumer goods | £96.8bn | 3,868p | 3.8% | -6.5% | -2.9% | £3.7bn |
| BP* | Oil & gas | £79.9bn | 471.65p | 4.7% | -14.3% | -11.5% | £3.8bn |
| GSK* | Healthcare | £68.4bn | 1,661.8p | 3.5% | 16.9% | 7.6% | £2.4bn |
| Diageo* | Alcoholic drinks | £66.1bn | 2,963.5p | 2.8% | -15.8% | 0.9% | £1.8bn |
| RELX | Tech/Financial | £64.2bn | 3,411p | 1.7% | 34.9% | 111.8% | £1.1bn |
| Rio Tinto* | Mining | £87.8bn | 5,127p | 6.7% | -14.2% | 17.7% | £5.8bn |
| British American Tobacco | Tobacco | £52.2bn | 2,334.5p | 9.9% | -25.4% | -18.5% | £5.2bn |
In total, these 10 companies are expected to pay out at least £43.1bn in dividends this year. Therefore, if I want to earn really big passive income from UK shares, I should probably own some of these stocks. As it happens, my wife and I own stakes in five of these 10 firms (see asterisks above).
I love this stock
If I needed to buy one of these 10 stocks for more passive income, I’d probably buy more Unilever (LSE: ULVR) shares. But why this Anglo-Dutch firm?
First, Unilever’s business model is simple: it sells fast-moving consumer goods — products that consumers use daily. Its wide range of brands are sold in 190+ countries, with 3.4bn people using Unilever products every day.
Second, Unilever is a big beast — currently valued at nearly £97bn– and a market leader in its field.
Third, its dividend yield of 3.8% a year is below the Footsie’s 4% cash yield, but the group has steadily increased these payouts for decades.
That said, this business has suffered from slowing or negative sales growth since growth peaked in 2021. Also, high inflation has hit consumer spending, hitting margins. Even so, we’re on board Unilever for long-term passive income, not short-term price movements!
