The London stock market’s a great place to find high-quality companies for passive income. The FTSE 100 and FTSE 250 are packed with shares with deep balance sheets, market-leading positions, and a strong commitment to making shareholder distributions.
This often makes them ideal stocks for investors seeking a large and growing second income over time. With this in mind, here are three world-class dividend shares I think are worth serious consideration.
Property hero
As a real estate investment trust (REIT), Primary Health Properties (LSE:PHP) receives tasty breaks on corporation taxes. And in exchange, it must pay at least 90% of profits from its rental operations out in the form of dividends.
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This doesn’t necessarily make REITs dependable income shares. There’s always a risk that earnings can underwhelm if a trust’s properties become empty or if rent collection issues arise.
Primary Health’s vulnerable to such issues, although its focus on the defensive medical property sector greatly reduces such threats. It’s why the FTSE 250 company has raised annual dividends every year since the late 1990s.
City analysts are expecting this proud record to continue over the medium term, too. And so the trust’s 7% dividend yield for this year rises to 7.5% by 2027.
City slicker
City of London Investment Trust‘s (LSE:CTY) history of unbroken annual dividend growth stretches back even further.
The trust — which focuses on shares listed on the London Stock Exchange — has raised yearly cash rewards for a staggering 58 years. It’s committed to holding cash during good years to pay out when downturns come along, offering a smooth return over time.
With exposure to almost 80 companies spanning different sectors, City of London’s well equipped to weather weakness among one or two holdings. What’s more, around 60% of its investments are in large-cap firms worth £5bn and above, providing extra resilience.
The trust’s forward dividend yield currently sits at 4.5%. That beats the corresponding average for both FTSE 100 and FTSE 250 shares by around a full percentage point.
While it carries greater regional risk than trusts holding global shares, it remains a top dividend stock to consider.
9.4% dividend yield
For my money, Legal & General (LSE:LGEN) is the best FTSE 100 dividend share that money can buy. And so it’s the largest single holding in my own Self-Invested Personal Pension (SIPP).
Factoring out a brief freeze during the pandemic, dvidends here have risen every year since 2009. And over that period, the size of the payouts have blown the large-cap average out of the water.
It’s a trend City analysts expect to continue, meaning a huge 9% dividend yield for 2025 eventually rises to 9.4% by 2027.
Put simply, Legal & General is a cash-generating powerhouse, giving it the financial strength to consistently pay large dividends. With its Solvency II ratio rising to 232% as of December 2024, the company has a strong buffer to support payout forecasts, even if weak consumer spending damages earnings.
Supported by structural growth across its product suite, I expect Legal & General to remain a top passive income stock for my portfolio.
