Picture supply: Getty Photographs
Dividends from UK shares are by no means, ever assured. So placing all an investor’s eggs in a single basket can decimate passive revenue when catastrophe strikes.
As we noticed throughout Covid-19, even corporations with rock-solid enterprise fashions and robust stability sheets can lower, cancel, or postpone dividends at a second’s discover.
Share pickers can cut back this risk by having publicity to a diversified number of dividend-paying shares. An investor who has a big wad of money can unfold that throughout a number of shares as an alternative of parking all of it in a single alternative.
Diversification doesn’t imply buyers must accept sub-par returns both. Certainly, if present dealer forecasts show correct, a £15k lump sum invested equally on these two shares would supply £1,350 in dividends in 2025 alone.
There’s good motive to consider these shares are worthy of additional analysis as they might present a superb long-term passive revenue too.
Phoenix Group
Dividend yield: 10.4%
At present, Phoenix Group‘s (LSE:PHNX) the one FTSE 100 share with a double-digit dividend yield. However not like many ultra-high-yielding shares, I believe predicted dividends right here look fairly safe.
You see, as a serious life insurance coverage supplier and asset supervisor, it collects huge quantities of money through coverage premiums and administration charges that it might distributes by the use of dividends.
It generated £950m of money within the first six months of 2024 and is on target to realize money technology of £4.4bn within the three years to 2026. With a Solvency II capital ratio of 168%, it has a superb buffer to at the very least meet this yr’s predicted dividends ought to earnings are available in on the low aspect.
There’s a hazard Phoenix’s share worth might fall if rates of interest stay at present ranges, hitting total shareholder returns. However rising long-term demand for monetary planning companies — mixed with its cash-rich stability sheet — nonetheless makes it value shut consideration amongst affected person buyers, in my e-book.
The Footsie agency’s heavyweight manufacturers SunLife and Commonplace Life give it added energy to capitalise on this quickly rising market too.
Threat reducer
Dividend yield: 7.6%
A lump sum funding within the iShares World Fairness Excessive Revenue UCITS ETF (LSE:WINC) is an efficient manner that buyers can diversify their portfolios whereas nonetheless solely straight holding just one or two shares.
As an exchange-traded fund (ETF), it’s designed to carry a basket of various belongings and thus unfold danger. On this case, the fund — which was created in March 2024 — focuses on 276 dividend-paying shares from throughout the globe.
What’s extra, these equities span a large number of sectors together with info know-how, monetary companies, healthcare, telecoms and shopper items.
On the draw back, a chunky 71% of the fund is invested in US corporations. As a consequence, it could be extra susceptible to a regional downturn than a extra globally diversified fund.
But however, its massive portfolio of US shares additionally supplies monumental alternatives, just like the rising digital economic system (by way of the likes of Nvidia) and rising world healthcare spending (tapped by way of Novartis shares).
Its 7%-plus dividend yield’s one of many largest amongst all UK-listed ETFs. I believe it might show to be a superb purchase to think about for long-term passive revenue.
