Phoenix Group Holdings (LSE: PHNX) remains one of the highest-yielding shares in the FTSE 100. Its annual dividend return already sits around 7.3%, but analysts forecast it will go even higher.
With such a generous dividend on offer, the real test is whether the underlying business is strong enough to keep delivering.
So is it? And how much could I realistically make from owning the shares?
Rising dividends from a high base
Phoenix has built a reputation for dependable income by steadily lifting its dividend over time.
It paid 47.5p in 2020, 48.9p in 2021, 50.8p in 2022, 52.65p in 2023, and 54p in 2024. These translated into respective annual average dividend yields to end‑2023 of 6.8%, 7.5%, 8.3%, and 5%.
Based on the current £7.43 share price, the latest 54p payout equates to a 7.3% yield. That is more than double the present FTSE 100 average dividend yield of 3.2%.
It also comfortably beats the UK’s risk-free rate (10-year UK Gilt yield) of 4.5%. This means investors are receiving a substantial premium for holding the shares.
Crucially, City forecasts point to further dividend increases over the next few years. This suggests this is a high-yield gem with momentum behind it.
Consensus analysts’ expectations are for payouts of 57.2p this year and 59p next year.
These would give respective dividend yields of 7.7% and 7.9%.
How sustainable?
A dividend this large only works if the underlying business is generating the cash to support it.
One risk worth noting is that its earnings growth is partly tied to broader market conditions. Weaker investor sentiment can slow new‑business inflows or reduce fee income, which may temper the pace of earnings expansion.
However, consensus analysts’ forecasts are that Phoenix’s earnings will grow at an eye‑catching 106% a year to end-2027. The key drivers for this are expected to be stronger fee income, improved new‑business margins, and ongoing cost efficiencies.
The last two major sets of results appear to back this up. In its full‑year 2024 results, released on 17 March 2025, Phoenix delivered £1.78bn total cash generation. This overshot the previous £1.4bn-£1.5bn 2024 target range.
It also reported a 31% year-on-year increase in IFRS adjusted operating profit. This was supported by strong growth in its capital-light Pensions and Savings division.
Its H1 2025 numbers saw IFRS adjusted operating profit rise 25% year on year to £451m. Operating cash generation increased 9%.
Phoenix said it is on track to achieve a 2024-2026 total cash generation target of £5.1bn. It added it is on course for around a £1.1bn IFRS adjusted operating profit this year.
So, how much could I make?
Another £20,000 in the stock could make me £21,410 in dividends after 10 years. This is based on an average 7.3% yield only, ignoring forecast rises, and the possibility of a reduction or cancellation. It also includes the effect of the dividends being reinvested in the stock.
After 30 years on the same basis, this would rise to £157,523. The total value of the holding would be £177,523 by then.
And this would generate £12,959 a year in dividend income at that point!
Given the forecast yield increases supported by Phoenix’s superb earnings‑growth projections, I am planning to buy more of the shares very soon.
