The FTSE 100 is packed full of brilliant passive income stocks, and Phoenix Group Holdings (LSE: PHNX) is one of the most spectacular.
During the recent market dip, its trailing dividend yield shot past 10%. The Phoenix share price has jumped 14% in the last month, and that’s driven down the yield. But it still cuts a dash at 8.93% a year.
That’s double what savers can get on deposit, and the gap is likely to widen after the Bank of England cut bank rate to 4.25% yesterday (8 May).
High yield, low growth
Of course, capital is at risk, and while Phoenix shares are up almost 20% in a year, they’re flat over five.
At today’s 604p, they’re actually trading at a 10-year low. So does that poor long-term performance wipe out the investment case? Let’s run some numbers.
I’m going to assume that an income-hungry investor put £10,000 into Phoenix shares on 8 May 2015. Back then, the shares cost 653p each. At that price our investor would have picked up 1,531 shares.
They’d have received their first payout on 1 October 2015, of 26.7p.
Over the subsequent decade, they’d have received total dividends of 473.5p for each share held. Their 1,531 of shares would have delivered total income of £7,249, which impressed me.
This doesn’t include the upcoming payment of 27.35p per share. That lands later this month on 21 May.
Of the initial investment, 72.5% has already been recovered. Plus they have the original shares too. Unfortunately, with the price down to 604p, that’s shrunk to £9,247.
Our investor is still comfortably ahead, at £16,496. Unfortunately, it’s too complex for me to calculate what they’d have if they reinvested every dividend. ‘Even more’, is my best guess!
While totting up all the half-yearly and annual dividends Phoenix has paid over the last decade, something else struck me.
As a rule, they increase.
Sustainable dividends
But the half-year dividend was trimmed from 25.1p to 22.6p in October 2018, while the half-year and annual 2020 dividends were frozen at 23.4p. However, that was during the pandemic, when many companies cut or cancelled payouts.
That’s a pretty solid track record, if you ask me, although dividend growth is modest. The May 2025 annual payout was increased just 2.62% to 27.35p, for example.
Given the massive yield, I’m not complaining. I’d much rather the board stuck to payouts it can afford.
And it should be able to afford them. In 2024, Phoenix generated £1.4bn of operating cash, a 22% rise, hitting its 2026 target two years early.
Hiking targets
An emboldened management then hiked its three-year cash generation target from £4.4bn to £5.1bn.
I don’t expect Phoenix shares to shoot the lights out at any point. The company operates in a competitive and mature sector, which may limit growth opportunities. It must keep scratching around for you areas to invest in. Bulk annuities is a promising growth area but other FTSE insurers are targeting that too.
As my figures show, Phoenix Group’s dividends can deliver a heap of passive over time. I think it’s well worth considering for income seekers, who should treat any growth as a bonus.
