March was a rough month for owners of shares and bonds, as a new Middle Eastern war caused prices to plunge. The US stock market had its worst month since September 2022, while the UK’s FTSE 100 index lost 6.7% in March. However, falling share prices push up dividend yields, boosting the passive income on offer to patient investors.
£88bn up for grabs
Analysts expect total dividend income from the FTSE 100 to hit an all-time high this year. The latest estimate is that Footsie firms will pay out a total of £88bn in cash to their owners in 2026.
What’s more, many big British businesses are buying back their own shares. So far in 2026, FTSE 100 companies have announced £29.4bn in share buybacks, nearly half of 2025’s total. Businesses buy back shares to shrink their future share bases, thus pushing up future earnings per share and dividends per share.
Overall, the total of ordinary dividends, special dividends, and share buybacks is expected to reach £118bn in 2026. This is the equivalent of almost 4.5% of the FTSE 100’s market value of £2.6trn. Whoa.
The trouble with dividends
Share dividends are my favourite form of passive income, but they are not risk-free. Most companies don’t make these payouts, with some preferring to reinvest their profits into future growth. That said, all but a few FTSE 100 firms pay out regular cash dividends.
Also, future dividends are not guaranteed, so they can be cut or cancelled at short notice. For instance, dozens of companies did this in the Covid-19 crisis of 2020/21.
An 8.6% yield from a household name
Right now, my family portfolio includes roughly 30 different individual US and UK shares. We bought a few of these for long-term growth, but most were acquired for their powerful passive income.
For example, take Legal & General Group (LSE: LGEN), the well-known UK provider of pensions, life insurance, and investment products. Founded in 1836, L&G has grown over almost two centuries into one of Europe’s biggest asset managers. Currently, it manages almost £1.2trn of other people’s money for millions of individual and institutional customers.
As I write, the L&G share price stands at 253.4p, valuing the group at nearly £14.4bn. The shares are up up only 3.6% over one year and have fallen 10.6% over five years. However, they offer a huge dividend yield of 8.6% a year — one of the highest in the London stock market. In contrast, the dividend yield for the wider FTSE 100 is just 3.1% a year.
For the record, my family portfolio bought L&G shares in mid-2022, paying 247p a share for our holding. To date, our paper gain is a mere 2.6%, but we bought this stock for its river of dividends. Instead of spending this cash, we use it to buy more L&G shares, increasing our company ownership. Also, L&G is spending £1.2bn on a huge share buyback programme, which will further boost our holding.
Of course, L&G’s fortunes are tightly tied to the future performance of financial markets. Should share and bond prices plunge again — as they did steeply in 2022 — then L&G’s revenues, earnings, and cash flow would suffer. Even so, we intend to keep our shares for their pumped-up passive income, come what may!
