For investors hunting for passive income, Phoenix Group (LSE: PHNX) remains a standout FTSE 100 opportunity, in my view.
The company is the UK’s largest life and pensions consolidator. This type of business is built around scale and cost discipline, and generates predictable, long‑duration cash flows.
The firm has consistently maintained one of the highest dividend yields in the top-tier index. And management explicitly targets sustainable, growing dividends.
So, what sort of income are we looking at here over time?
Rising dividend yield forecasts
In 2024, Phoenix paid a 54p total dividend, currently yielding 7.2% on the £7.45 share price. This is more than double the FTSE 100’s current average of 3.1%.
Nonetheless, analysts forecast the dividend will rise to 54.7p this year, 57.2p next year, 59p in 2027, and 60.8p in 2028. These imply respective yields of 7.3%, 7.7%, 7.9%, and 8.2%.
This continues a clear rising trend over the past five years, in line with management’s progressive dividend policy. This is where a dividend is expected to rise with earnings per share but will not be cut if earnings fall.
Specifically, these have risen from 47.5p in 2020 to 54p in 2024, while 2025’s interim dividend was 27.35p against 26.65p last year.
How much passive income can be made?
I have a £20,000 holding in Phoenix, and the same amount would buy 2,685 shares now.
With this holding investors would make £21,000 in dividends after 10 years at the current 7.2% yield. It ignores future forecast rises, but also potential falls, which can occur over time. The figure also includes the dividends being reinvested back into the stock, known as ‘dividend compounding’.
On the same basis, the dividends could potentially rise to £152,307 after 30 years. Including the initial investment, the holding would be worth £172,307 by then.
And at that stage, it would pay £12,406 in yearly passive income.
Solid business foundations?
Phoenix’s model is built on long‑duration life and pensions cash flows, with a focus on closed life‑insurance books. These are policies no longer sold to new customers, but that still generate steady, long‑term cash flows as they wind down.
This capital supports the dividend and funds new acquisitions, which then add further cash flow to the group.
A risk here is a further squeeze on household finances as living costs rise. This could lead customers to close policies, reducing the cash flows Phoenix relies on.
However, its latest results (H1 2025, released on 8 September) saw adjusted operating profit rise 25% year on year to £451m. Operating cash generation – which can be a major growth driver in itself – increased 9%. And the interim dividend was raised 3% to 27.35p.
Phoenix said it remains on track to achieve a 2024-2026 total cash generation target of £5.1bn, with £2.6bn of this already made.
It is also on target for a 140%-180% shareholder capital coverage ratio range, which currently stands at 175%.
My investment view
I believe Phoenix remains one of the FTSE 100’s most reliable income engines.
The dividend is supported by long‑duration cash flows and a strong solvency position. Forecasts point to steady earnings and cash generation, strengthening the case for rising dividends over time.
I will be adding to my holding very soon and think the stock well worth other investors’ consideration too.
