FTSE 100 income stocks do not come much more dependable than Phoenix Group Holdings (LSE: PHNX), in my view.
Its long-term savings and retirement model is designed to generate surplus capital year after year. And that underpins one of the most generous dividend yields in the top-tier index.
These strong, reliable, recurring cash flows are projected to remain robust, driven by exceptional earnings growth.
So, how much can I make from my existing £20,000 holding in the firm?
Rising dividends forecast
Phoenix paid a dividend of 54p in 2024, giving a 7.2% yield on the present £7.48 share price. This is more than double the current FTSE 100 average of 3.1%.
It also sits comfortably above the 4.5% ‘risk-free rate’ (10-year UK gilt yield) — my benchmark for share dividend yields. This is because I want compensation for taking the extra risk attached to investing in shares over taking no risk at all.
Moreover, the consensus forecast of analysts is that the dividends will rise to 57.1p this year, 58.9p next year, and 60.7p in 2028. These would generate respective dividend yields of 7.6%, 7.9%, and 8.1% in those years.
Do these rises look realistic?
Company dividends are powered over the long term by growth in earnings (or ‘profits’). A risk to Phoenix is any surge in the cost of living, which might prompt customers to withdraw funds or close accounts. However, consensus analysts’ projections are that its earnings will grow by a standout annual average of 106% to end-2028.
This is expected to be driven by its portfolio of long-term savings policies, which continue releasing substantial, predictable surplus capital every year. Cost efficiencies from simplifying older systems are also expected to lift margins and strengthen its cash generation.
Meanwhile, new bulk‑annuity contracts should add profitable, long-duration income streams that support sustained growth. According to industry forecasts, the UK bulk‑annuity market alone is expected to exceed £50bn of deals a year for the rest of the decade. That is more than double historic levels, as thousands of defined‑benefit pension schemes move closer to buyout.
Phoenix’s latest results (H1 2025) 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%.
How much dividend income?
My £20,000 holding in Phoenix would make me £24,836 in dividends after 10 years and £205,330after 30 years.
These numbers are based on two factors. The first is the forecast dividend yield of 8.1%, although this can change over time — down or up. The second is the dividends being reinvested back into the stock over the period. This is done to effectively turbocharge the dividend income through the extraordinary power of ‘dividend compounding’.
The period itself — 30 years — is widely seen as a standard investment cycle for long-term investors. It starts with initial investments around the age of 20 and ends in early retirement options at about 50.
At the end of that 30-year period, my Phoenix shares would be worth £225,330. And these would be paying me a yearly dividend income of £18,252.
Given this, and its strong forecasts earnings growth that should support such gains, I will buy more of the stock very shortly.
