With yields of over 8.8%, which of the top 5 passive income shares in the FTSE 100 do you think is the best?

Passive income hunters have plenty of FTSE 100 high yield stocks to choose.

The table below shows the top five current returns.

Stock	Yield (%)
Vodafone	10.6
The Phoenix Group	10.4
M&G	10.0
Legal & General	9.3
British American Tobacco	8.8

Each investor’s interpretation of the “best” action will be different, depending on their goals and circumstances. In my case, I’m looking for the one that is most likely to continue to pay its dividend over the long term.

Here goes…

Right now, I’m going to make discounts Vodafone.

That’s because the table is based on the amounts paid in the last 12 months. And in March, the telecom giant announced a 50% cut in its dividend.

He made a similar cut in 2019.

I think two declines in five years excludes the stock from being considered one of the best.

Other candidates

In contrast, British American Tobacco (LSE: BEAT) has increased its pay for 25 consecutive years.

However, I fear that as the company moves away from traditional cigarettes, cash available for dividends is likely to come under pressure. Vapes and other alternatives are more expensive to make, which means its margin will decrease.

These new products are also facing increased restrictions from governments around the world. At worst, they could be banned altogether.

I am sure that British American Tobacco will continue to pay generous dividends for years to come. However, I think there will come a time when they will follow Vodafone’s example and have to reduce their payment. Because of this, I don’t think the tobacco company stock is the best for my passive income portfolio.

That leaves three candidates, all from the financial services sector.

The Phoenix Group has the highest yield (excluding Vodafone) but reported a loss of £646m for the six months to 30 June 2024. The insurer blamed “adverse economic swings due to higher levels of interest rates and global equities” for his poor performance. It also made a loss in 2023 (£88m) and 2022 (£2.65bn). This makes me wonder if its dividend is sustainable.

M&G it has all the credentials of an excellent income stock. But the asset manager’s recent share price performance worries me. It’s down 18.5% from its peak in March 2024. Part of the above-average return is due to a decline in stock valuation rather than an increase in dividends.

my favorite

This is leaving Legal & General (LSE: LGEN) which – I think – is currently the best passive income stock for me. It has pledged to raise its dividend by 5% in 2024. And then by 2% per year from 2025 to 2027. Of course, payouts are never guaranteed.

Analysts expect earnings per share of 19.41p in 2024. Based on a current share price (November 1) of 218p, this implies a price-to-earnings (P/E) ratio of 11.2 — comfortably below the FTSE 100 average — and identical to the company’s 10-year average. Looking to 2026, the P/E ratio falls to a very attractive 8.4.

But like Phoenix Group and M&G, its financial performance is sensitive to global economic conditions. Lower interest rates are also likely to impact its annuity business.

However, it has a huge (£24 billion) book of pension funds that it is in talks to acquire. Also, the value of future profits from its insurance business is currently higher than the group’s stock market valuation.