5 FTSE 100 stocks to consider for a lifetime of passive income

I see lots of cheap dividend stocks in the FTSE 100 right now, but prices are starting to rise. Here’s how I’d look for diversified income.

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I was looking at some top FTSE 100 dividend stocks recently, and my eye again fell on Phoenix Group Holdings (LSE: PHNX) and its forecast 10.6% yield.

I worked out that if I invest £200 per month in Phoenix Group, after 20 years I could have enough to pay me an annual passive income of around £16,000.

That makes a lot of assumptions, though. Like the dividend would remain unchanged for the next two decades. Oh, and the share price wouldn’t change either.

No smooth ride

Anyone who’s looked at events in the financial sector over the past 10 years will probably dismiss the chance of either of those happening straight away.

Phoenix is in a notoriously cyclical business. And if earnings volatility should damage the dividend one year, I fear the share price could suffer.

Still, forecasts look good, and I think Phoenix could be a nice addition to a long-term Stocks and Shares ISA. But I’d want a good bit of diversification to help manage my risks.

Long-term safety

Looking at some of the other FTSE 100 dividend yields on offer now, I just can’t ignore Taylor Wimpey.

There’s a 6.4% dividend yield on offer. It would still be a nice annual return if it can keep going. In the short term, though, I think that probably raises the biggest caution.

Fellow builder Barratt Developments has cut its dividend, given pressure on the property sector. And Taylor Wimpey could do the same.

But the real attraction to me is the very long-term nature of the business. The UK’s housing shortage, plus barriers to new firms trying to get in, make me think I see a cash cow here.

With safety in mind again, I think I’d add Tesco to a long-term income portfolio if I was starting now. The dividend is modest at 3.8%, but I’d hope for stable total returns.

Controversial

My final two suggestions here are perhaps a bit controversial, for different reasons.

One is British American Tobacco, with a 9.9% dividend yield. It’s perhaps a bit dodgy from an ethics standpoint. And many investors think the tobacco industry is doomed anyway.

But I think tobacco products could be with us for a very long time. And purely from a financial view, I can see another cash cow here.

My fifth choice is BT Group, with its huge debt pile the biggest drawback I can see. Oh, and the share price slide of the past five years hasn’t helped total returns, even if the dividend has been good.

Still, after posting what could be a turnaround set of FY results, BT has upped its dividend again. If it can keep its 6%+ yields going, maybe I could just take the cash and not worry about anything else.

Total returns

Speaking of total returns, the average Stocks and Shares ISA has managed 9.6% per year in the past decade.

That’s ahead of the very long-term UK stock market performance. But I reckon there could be enough cheap dividend stocks in the FTSE 100 to give us a good crack at it.

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco P.l.c. and Tesco Plc. 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.

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