Among all its peers in the FTSE 100, Phoenix Group (LSE:PHNX) shares take the crown when it comes to dividend yield. The evolving insurance enterprise offers a massive payout of 8.3%, enabling investors to instantly unlock a pretty substantial hands-free income stream overnight. What’s more, if analyst projections are accurate, today’s chunky yield could be set to grow even further over the next couple of years.
So how much money could investors start earning if they buy 750 shares today for £4,930?
Calculating income
Last month, the company paid its final dividend for its 2024 fiscal year. Combined with the interim dividend from October last year, the total dividend per share currently sits at 54p. So for those holding 750 Phoenix shares in their portfolios, that translates into a passive income of £405 – not bad considering the original cost of investment.
However, as previously stated, this might simply be the tip of the iceberg when looking at analyst forecasts.
| Fiscal Year | Dividend Forecast | Forward Yield | Dividend Income From 750 Phoenix Shares |
| 2025 | 55.55p | 8.45% | £416.6 |
| 2026 | 57.1p | 8.68% | £428.3 |
| 2027 | 58.7p | 8.93% | £440.3 |
| 2028 | 60.3p | 9.17% | £452.3 |
| 2029 | 61.9p | 9.41% | £464.3 |
If these projections are correct, investors can expect their dividend income to grow by an average of 3.5% a year between now and 2029. That’s comfortably ahead of normalised inflation – a handy advantage for investors relying on dividend income for everyday expenses such as retirees.
But it’s not just pensioners set to benefit here. Over the last 12 months, Phoenix’s shares shave climbed almost 35% as earnings ramped up. And some institutional investors appear to be optimistic that further capital gains could lie on the horizon.
Digging deeper
A big part of Phoenix’s ability to pay chunky dividends is its impressive cash generation. In fact, operating cash flows expanded by 22% in 2024 as demand for its financial products continued to rise. But it’s not just dividends receiving some TLC.
The company’s blown past its debt reduction targets, deleveraging its balance sheet at a much faster-than-anticipated rate. And even in 2025, another $250m’s been wiped out, boosting the group’s Solvency ratios in the process. That means less money’s wasted on paying interest and is instead allocated to securing future growth investments as well as rewarding shareholders.
However, there are still a few weak spots. Management’s strategy to move away from life insurance and towards pension and annuity products has been quite lucrative so far. But it also exposes the bottom line to a much higher level of interest rate sensitivity as well as longevity risk.
If rates fall sharply or customers end up living longer than expected, the quality of Phoenix’s earnings will likely suffer. And the impact of this could be much higher compared to its peers like Aviva and Legal & General, which have far more experience navigating the full-service insurance market.
The bottom line
The high yield of Phoenix shares is a reflection of the risk associated with this business. Having only recently started to pivot away from life insurance, management’s yet to prove it can sustainably compete with other industry titans. But, given the potential rewards on offer, investors may want to consider investigating further.
