As an older investor, my family portfolio is safer than when I was a younger man. Today, it includes many dividend stocks to generate high levels of passive income.
Over time, my wife and I intend to entirely replace our earnings with unearned income, largely from two main sources. First, state, company and personal pensions. Second, from a balanced, diversified portfolio of dividend shares.
I love FTSE 100 dividends
But one problem with future dividends is that they’re not guaranteed, so can be cut or cancelled without warning. Another big problem with cash dividends is that most companies listed on the London stock market don’t pay them.
In some cases, loss-making companies don’t have the funds to pay out cash to their shareholders. Other firms prefer to reinvest their profits into boosting future growth. Either way, these businesses don’t provide my family with the passive income we seek.
Then again, almost all members of the UK’s elite FTSE 100 index do pay dividends to their owners. That’s why the Footsie is my happy hunting ground for juicy dividend stocks.
Five dividend Goliaths
For example, the five companies listed in the table below all pay out massive cash sums to their shareholders. Here they are, sorted from largest to smallest by market value:
Company
Sector
Market value
Share price
Dividend yield
One-year change*
Five-year change*
Yearly dividend
Shell
Oil & gas
£161.1bn
2,494p
4.1%
0.5%
6.5%
£6.6bn
AstraZeneca
Healthcare
£158.4bn
10,220p
2.2%
-8.8%
61.8%
£3.5bn
HSBC Holdings
Banking
£114.1bn
597.2p
8.0%
-5.2%
-2.9%
£9.2bn
Unilever
Consumer goods
£100.0bn
4,002p
3.7%
-4.6%
0.5%
£3.7bn
BP
Oil & gas
£79.3bn
466.1p
4.8%
-14.8%
-13.0%
£3.8bn
*These returns exclude dividends.
For the record, these are the Footsie’s five largest businesses. The largest is worth over £160bn, while the smallest is worth almost half that. In other words, these are the big beasts of the UK stock market.
As a result of their size, dividend payouts from these five groups are huge, ranging from £3.5bn a year to £9.2bn a year. Across all five businesses, the total yearly dividend comes to a whopping £26.8bn.
Total FTSE 100 dividend income for 2024 is forecast to be £83.7bn. Therefore, these five giants could pay out almost a third (32%) of total Footsie dividends this calendar year. Wow.
I like this stock
For the record, my wife and I bought one of these stocks six months ago for its impeccable history of paying out passive income. The company in question is consumer goods colossus Unilever (LSE: ULVR).
Unfortunately, our timing was hardly ideal when we bought into this £100bn Anglo-Dutch behemoth last August. We paid 4,122.2p a share, but the stock then dived, hitting a 52-week low of 3,671.5p on 23 January.
The mega-cap stock has since rebounded strongly, closing at 4,002p on Friday (23 February). The shares now deliver a dividend yield of 3.7% a year, just below the FTSE 100’s yearly cash yield of 4%. But Unilever has a long record of steadily lifting its dividends.
Granted, the business had a tough 2022-23 due to falling sales growth and margin shrinkage. And growth this year could be below-trend. Still, I’m hopeful of higher revenues, profits and cash flows in 2024-25. Hence, we intend to hang on to our holding for many years for its passive income!
The post These super shares pay passive income of £27bn a year! appeared first on The Motley Fool UK.
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HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Cliff D’Arcy has an economic interest in BP and Unilever shares. The Motley Fool UK has recommended AstraZeneca, HSBC Holdings, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
