Investing in FTSE 100 shares has been a great way for me to make a passive income down the years. And I’m looking to build my exposure to UK blue-chip stocks in the coming session.
Buying a Footsie tracker fund can be a great way to build capital gains and generate a decent second income. Today the index’s forward dividend yield sits at 3.8%.
But I think I can generate a better dividend income by selecting individual stocks. Phoenix Group (LSE:PHNX), M&G (LSE:MNG) and Unilever (LSE:ULVR) are three on my shopping list today.
A rising second income
I’m searching for shares with market-beating dividend yields. And importantly, I’m also looking for companies that can gradually grow payouts over time. This is the key to building long-term wealth and reducing the impact of inflation on my returns.
As the table below shows, each of these FTSE stocks meets both of these criteria.
| Stock | 2024 dividend yield | 2025 dividend yield |
|---|---|---|
| Phoenix Group Holdings | 10.7% | 11% |
| M&G | 8.9% | 10.2% |
| Unilever | 3.9% | 4.2% |
Reliable cash flows and robust balance sheets have allowed these businesses to steadily grow dividends over time. And City analysts are expecting this record to continue for the next couple of years at least, as shown in the below table.
| Stock | 2024 dividend per share | 2025 dividend per share |
|---|---|---|
| Phoenix Group Holdings | 54.2p | 56.1p |
| M&G | 21p | 25.1p |
| Unilever | 151.7p | 160.4p |
Dividends are never, ever guaranteed. But if these forecasts prove correct, £15,000 invested equally across these Footsie shares would make me £1,157 in passive income this year.
That’s a pretty decent return, in my opinion. But I’m not finished yet: the figure moves to £1,270 for 2025.
Growth opportunities
I don’t have unlimited funds available to buy UK shares. I’m hoping to add Phoenix and M&G to my portfolio sooner rather than later, though.
There’s no guarantee these companies will generate the long-term returns I’m hoping for. Competition in the financial services sector is intense. What’s more, they may struggle to grow earnings in the short-to-medium term if tough economic conditions endure.
However, the long-term outlook for both businesses remains pretty exciting. And this makes them top investments. I believe demand for their life insurance, retirement and wealth products to steadily increase as Britain’s elderly population rapidly expands.
And in the meantime, their robust balance sheets should allow them to keep paying huge dividends. M&G and Phoenix’s Solvency II capital ratios stand at a weighty 199% and 180%, respectively, latest financials show.
Brand hero
Consumer goods giant Unilever has one of the greatest dividend records on the FTSE 100. It’s raised annual payouts for more than 30 years on the spin.
This is thanks in large part to its diversified business model, which in turn helps prevent earnings shocks. It sells products across multiple product categories, from soap and laundry detergent to deodorant, foods and bleach. Its global footprint also helps guard it against trouble in one or two regions.
Unilever’s huge portfolio of winning brands also makes it such a brilliant investment today. Labels like Dove, Magnum and Hellmann’s are market leaders hat the firm can steadily rise prices of to boost sales.
Local, independent labels are steadily growing in popularity. But soaring emerging market demand for its powerhouse brands means Unilever remains a top long-term buy for me.
