Is now a good time to grow your wealth with UK passive income shares? Research shows that buying high-yield dividend stocks and dividend growers can be one of the best ways to build a portfolio.
The FTSE UK Dividend+ index showcases the excellent returns that London-listed shares can deliver. This index — which measures the performance of the 50 highest-yielding stocks from the FTSE 350, excluding investment trusts, delivered a 32.9% return over the 12 months to January.
By comparison, the broader FTSE 350 delivered a lower (if still robust) 21.2% return over the period.
The question is: can investors keep making juicier returns by focusing on dividend shares?
Chasing dividend yield
I believe they could, and especially as demand for classic ‘old world’ shares like miners, banks, and consumer goods producers picks up. These companies are soaring in popularity as investors fearful of an AI bubble pile into blue-chip stocks with steady (if unspectacular) growth and solid balance sheets.
Investors seeking super-large dividends might need to be more selective right now, however. This is because soaring share prices have pulled down dividend yields, meaning less income for each pound that’s invested. The current FTSE 100 index yield, for instance, is now 2.8%. That’s below the long-term average of 3% to 4%.
What’s the best way to tackle this problem?
Tracking UK income shares
The simplest way could be to purchase shares in the iShares UK Dividend UCITS ETF. This exchange-traded fund is designed to track the the performance of the FTSE UK Dividend+ index, so investors know they’re getting exposure to some of the highest-yielding British stocks.
This strategy also provides excellent diversification by spreading investors’ cash across 50 companies. So in theory, it could return a solid passive income even if one or two dividend shares deliver disappointing individual returns.
There is one problem, though: at 4.6%, the dividend yield here is healthy rather than spectacular. A better way to target passive income, therefore, could be by building your own diversified portfolio of shares.
A FTSE income share to consider?
Phoenix Group (LSE:PHNX) is one proven dividend hero to seriously consider right now. As the chart shows, its dividend yield has been comfortably above 6% for most of the last five years.
The good news is City analysts expect annual dividends to continue growing, backed up by Phoenix’s cash-rich balance sheet. This means enormous yields of 7.3% for 2026 and 7.6% for 2027. As of last June, the firm’s Solvency II capital ratio was a chunky 175%, latest financials show.
Can this FTSE 100 dividend star keep delivering for investors, though? I think so, even though earnings could take a whack in the near term if economic conditions worsen. I expect profits to grow strongly over time as demand for pensions and other retirement products booms. In the meantime, Phoenix’s enormous cash pile should keep the passive income rolling in.
