£10,000 of Phoenix Group shares could net me a £1,009 monthly passive income!

Thanks to one of the FTSE 100’s biggest dividend yields, one large investment in Phoenix Group shares could create a lifelong passive income.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young Asian man drinking coffee at home and looking at his phone

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.

Phoenix Group (LSE:PHNX) shares have proved an exceptional investment for dividend investors for more than a decade.

Shareholder payouts have marched steadily higher in that time. And the yield on the FTSE 100 company has long beaten the index average of 3% to 4% during the period.

Phoenix Group's dividend history.
Source: TradingView

Past performance is no guarantee of future returns. But encouragingly for income chasers, the City’s community of analysts are expecting dividends from Phoenix shares to keep marching skywards.

Should you invest £1,000 in Schroders Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Schroders Plc made the list?

See the 6 stocks

So how much passive income could I make with a £10,000 investment today?

11.1% dividend yield

Phoenix’s long track record of generous and growing dividends reflects its commitment to having a healthy balance sheet. Even when earnings have fallen — which has occurred three times in the past five years — cash rewards have marched steadily higher.

Last year, the Footsie firm raised the shareholder payout 4% to 52.65p per share. And as the table below shows, dividends are tipped by City brokers to keep rising through to 2026 at least:

YearDividend per shareDividend growthDividend yield
202454p3%10.4%
202555.6p3%10.8%
202657.3p3%11.1%

As you can see, the dividend yields on Phoenix shares are subsequently two to three times larger than the FTSE 100 average.

And even if dividends fail to grow beyond 2026, I could still make a four-figure monthly dividend income with a lump sum investment.

Compound gains

Let’s say that I have £10,000 that’s ready to invest. If broker forecasts are accurate, this would net me:

  • £1,040 in dividends in 2024
  • £1,080 in dividends during 2025
  • £1,110 worth of dividends in 2026

If dividends remained locked at 2026 levels, during the next decade I’d enjoy £11,100 in dividends. Over 30 years, I’d make a £33,300 in passive income.

That’s not bad, I’m sure you’ll agree. But it’s not as much as I’d make by reinvesting my dividends, or compounding my returns.

A huge passive income

If I used this common investment strategy, I would — after 10 years, and based on that same 11.1% dividend yield — have made £22,208 in dividends. That’s more than double the £11,100 I’d otherwise have made.

On a 30-year basis, the difference is even starker. With dividends reinvested, I’d have made a passive income of £291,653. That dwarfs the £33,300 I’d have generated without reinvestment.

With my £10,000 initial investment added, my portfolio would be worth a staggering £302,653 (assuming zero share price growth). With a 4% annual withdrawal, I’d have £12,106 of passive income, which equates to £1,009 a month.

Bright outlook

That said, I’m expecting Phoenix’s share price and dividends per share to rise strongly over this timeframe, too, a scenario that would give me an even bigger second income.

I expect profits here to balloon in the coming decades, as the UK’s booming elderly population drives demand for pensions and other retirement products.

If it can maintain a strong balance sheet, Phoenix could continue paying large dividends while investing for growth, too. Encouragingly, its Solvency II ratio is a formidable 168%, according to its latest financials.

The company faces significant competitive pressures that could blow earnings and dividends off course. But all things considered, I think Phoenix shares are worth a very close look right now.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

£20K invested in Tesla stock last April is now worth…

Despite all the bad headlines lately, Tesla stock has put in a storming performance over a 12-month timeframe. Is this…

Read more »

Investing Articles

If a 40 year old invests £600 a month in a SIPP, here’s what they could have by retirement

With no retirement savings at 40, an investor could put £600 a month into a SIPP and grow its value…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »