I love big, fat, juicy high-yielding FTSE 100 second income stocks. My love grows every time they send me a big, fat, juicy dividend – which I automatically reinvest to buy more shares.
I added the three biggest FTSE 100 yielders to my portfolio at various points in 2023. The income and growth they offer is already starting to compound nicely.
In one respect, this was a risky manoeuvre, because all three are in the same sector, one that was out of favour at the time: financial services.
FTSE 100 high yield stars
The stocks are wealth manager M&G (LSE: MNG), insurer and asset manager Legal & General Group and insurance conglomerate Phoenix Group Holdings. They offered king-sized yields when I bought them and, as this table shows, they’re still paying a pretty handy income today.
| Stock | Trailing yield | 1-year growth | 5-year growth |
| M&G | 7.88% | 27.5% | 67.2% |
| Legal & General | 8.42% | 5.1% | 14.1% |
| Phoenix Group | 8.23% | 35.6% | 2.5% |
High dividends have to be treated with caution. Often, they’re a result of an underperforming share price. Yields are calculated by dividing a company’s dividend per share by its share price. If the price drops, the yield automatically rises.
All three struggled while investors chased growth areas such as US tech or sought risk-free yields from cash and government bonds. But this year, they’ve staged a bit of a rally.
M&G shares are flying!
M&G’s had a brilliant month. Its shares are up almost 17%, boosted by news that Japan’s Dai-ichi Life Holdings has chosen it as its preferred asset management partner in Europe. M&G anticipates at least $6bn in new fund flows over the next five years as a result. Over one year, the M&G share price is up 27.5%.
M&G shares were already in demand after a solid 2024, when operating profit before tax climbed 5% to £837m in 2024, helped by a 19% increase in asset management profits.
It still faces challenges. The group suffered £1.9bn of net outflows last year amid market volatility, and the shift to passive investing is a threat. It also needs to expand into new areas to keep profits rolling in – but many of these, notably bulk annuities, are fiercely competitive.
Like most stocks, it’ll have good years and bad. The dividend’s now set to grow by just 2% a year. Happily, it’s starting from a high base.
£20k, £1,636 income
Let’s say an investor considered splitting a £20,000 Stocks and Shares ISA equally between these three. Something they should only consider doing if they already have exposure to a spread of other sectors.
Today, the average dividend yield across the trio is 8.18%. That would generate income of £1,636 in year one, with any capital growth on top.
With luck, that income should grow next year – even if only by a couple of percentage points – as these three companies aim to increase shareholder payouts.
And by reinvesting those dividends, they’d buy more shares, generating even more income in future.
No guarantees, of course. And as I said, I wouldn’t start a portfolio just with three financials. But I think they’re well worth considering for long-term investors seeking maximum passive income and, with luck, a spot of growth along the way.
