Buying 1,852 shares in this ultra-high yield FTSE 100 income stock would give me £1k a year

Harvey Jones is keen to load up on this blue-chip income stock that pays the highest yield on the FTSE 100. He’s even set himself a target.

| More on:
Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper

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.

The last FTSE 100 income stock I added to my portfolio was the one that pays the biggest yield of all. Step forward, Phoenix Group Holdings (LSE: PHNX), the insurance conglomerate best known to investors for its double-digit yield.

I bought 218 Phoenix shares on 31 January, followed by another 297 on 4 March. In total, they cost me £2,500. I also picked up another 27 shares, when I invested my first dividend on 24 May, worth £137. That’s a relatively modest total, but I’m not done yet. I’m considering adding to my tally, but I have one obvious concern. Is that yield for real?

I wouldn’t have bought it if I didn’t think so, but it still worries me. Double-digit yields are vulnerable, as any Vodafone investor can tell you.

Can I trust that dividend?

If investors were convinced they’d get 10% a year forever, or at least the next decade, they’d pile in, wouldn’t they? But as ever with dividends, there are no guarantees. Yet the Phoenix per share dividend growth has been pretty solid, as my table shows.


It has increased its dividend over the last four years by 0.7p, 1.4p, 1.9p, and 1.85p. Markets forecast another 1.35p uplift in 2024 to 54p. That doesn’t look like a company that is worried about funding shareholder payouts.

My table also shows that yield has steadily climbed, courtesy of the falling Phoenix share price. It has dropped 14.7% over the last year, and 25% over five years. That compares to FTSE 100 growth of 9.1% and 16.2% respectively. So those high dividends come at a price.

Personally, I think markets have been harsh on Phoenix. When it published full-year results on 22 March, the share price jumped 8.4% from 488.2p to 529.2p and I felt vindicated. It has since retreated to 502p.

High and also rising

I’m baffled. The 2023 numbers were good, with total cash generation beating the group’s £1.8bn target to hit £2bn. That will help fund the dividend yet still the share price flounders.

I suspect that is partly down to wider market conditions. A lot of FTSE 100 high yielders have sold off lately, as interest rate cut hopes recede. That downwards trend could reverse when rates do finally fall, slashing yields on cash and bonds. At that point, Phoenix could fly. Unless it’s a value trap, that is.

Today, my 542 shares are worth £2,720. If analysts are correct and the 2024 dividend per share is 54p, that would give me income of £292.68.

If I wanted to up that to a somewhat more meaty £1,000 a year, I’d need to buy another 1,310 shares, lifting my total to 1,852. Today, that would cost me £6,576. I don’t have that much to hand today so I will buy Phoenix in dribs and drabs, taking advantage of any share price dip. I’ll get there, with luck before the share price kicks on, assuming it ever does. If it doesn’t, at least I’ll have the 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.

Harvey Jones has positions in Phoenix Group Plc. The Motley Fool UK has recommended Vodafone Group Public. 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

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Buying 8,617 Legal & General shares would give me a stunning income of £1,840 a year

Legal & General shares offer one of the highest dividend yields on the entire FTSE 100. Harvey Jones wants to…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

£25k to invest? Here’s how I’d try to turn that into a second income of £12,578 a year!

If Harvey Jones had a lump sum to invest today he'd go flat out buying top FTSE 100 second income…

Read more »

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine
Investing Articles

2 lesser-known dividend stocks to consider this summer

Summer is here and global markets could be heading for a period of subdued trading. But our writer thinks there…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Here’s how I’d aim to build a £50K SIPP into a £250K retirement fund

Our writer outlines the approach he would take to try and increase the value of his SIPP multiple times in…

Read more »

Investing Articles

9.4%+ yields! 3 proven FTSE 100 dividend payers I’d buy for my Stocks and Shares ISA

Our writer highlights a trio of FTSE 100 shares with yields close to 10%. He'd happily pop them into his…

Read more »

Mixed-race female couple enjoying themselves on a walk
Investing Articles

Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity…

Read more »

Newspaper and direction sign with investment options
Investing Articles

Huge gains and 9% yields: why now’s an amazing time to be a stock market investor

The stock market’s generating fantastic returns in 2024. Whether you're looking for gains or income, it’s a great time to…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

This steady dividend payer looks like one of the best bargain stocks in the FTSE 100

A yield of 4.7% and a consistent dividend record make this FTSE 100 company look like good value in an…

Read more »