£10,000 of Phoenix Group shares could earn you a monthly passive income of £1,009!

Phoenix Group Shares (LSE:PHNX) have proved an exceptional investment for dividend investors for over a decade.

Payouts to shareholders have risen steadily during that time. And the performance of the FTSE 100 The company has long outperformed the index’s average of 3% to 4% over the period.

Past performance is no guarantee of future performance. But, encouragingly for income seekers, the City analyst community expects dividends on Phoenix stock to continue marching skyward.

So how much passive income can I get from a £10,000 investment today?

Dividend yield of 11.1%.

Phoenix’s long history of generous and growing dividends reflects its commitment to a healthy balance sheet. Even when revenue has fallen, which has happened three times in the past five years, cash rewards have steadily increased.

Last year, the Footsie firm increased its shareholder payout by 4% to 52.65p. by action And as the table below shows, City brokers offer dividends to continue rising through at least 2026:

As you can see, dividend yields on Phoenix shares are trailing two to three times the FTSE 100 average.

And even if dividends don’t grow beyond 2026, you could still earn four-figure monthly dividend income with a global investment.

Compound earnings

Let’s say I have £10,000 that is ready to invest. If the brokers’ predictions are accurate, this would allow me to:

• £1,040 in dividends in 2024
• £1,080 in dividends during 2025
• Dividends worth £1,110 in 2026

If dividends were to remain locked in at 2026 levels, it would enjoy £11,100 in dividends over the next decade. Over 30 years, you would earn £33,300 in passive income.

Not bad, I’m sure you’ll agree. But it’s not as much as I would earn by reinvesting my dividends or growing my returns.

A huge passive income

If I used this common investment strategy, after 10 years and based on the same dividend yield of 11.1%, I would have earned £22,208 in dividends. That’s it more than double the £11,100 he would have otherwise earned.

In 30 years, the difference is even more marked. With the reinvested dividends, you would have earned a passive income of £291,653. This eclipses the £33,300 it would have generated without reinvestment.

With my initial £10,000 investment added, my portfolio would be worth a staggering £302,653 (assuming zero share price growth). With a 4% annual withdrawal, you would have £12,106 in passive income, which equates to £1,009 a year.

Bright panorama

That said, I look forward to Phoenix’s stock price i dividends per share will also increase strongly over this time period, a scenario that would give me an even bigger second income.

I expect profits here to increase in the coming decades as the UK’s booming elderly population drives demand for pensions and other retirement products.

If it can maintain a strong balance sheet, Phoenix could also continue to pay big dividends while investing for growth. Encouragingly, its Solvency II ratio is a formidable 168%, according to its latest financial data.

The company faces significant competitive pressures that could derail earnings and dividends. But all things considered, I think Phoenix stock is worth a close look right now.