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Invest in FTSE 100 stocks have been a great way for me to earn passive income over the years. And I'm looking to increase my exposure to UK blue chip stocks in the coming session.
Buying a Footsie tracking fund can be a great way to generate capital gains and generate a decent second income. Today, the index's forward dividend yield stands at 3.8%.
But I think I can generate better dividend income by picking individual stocks. Phoenix Group (LSE:PHNX), M&G (LSE:MNG) and Unilever (LSE:ULVR) are three on my shopping list today.
A second income on the rise
I'm looking for stocks with market-beating dividend yields. More importantly, I'm also looking for companies that can gradually increase payments over time. This is the key to building long-term wealth and reducing the impact of inflation on my returns.
As the table below shows, each of these FTSE shares meets both criteria.
| Stock | Dividend yield 2024 | Dividend yield 2025 |
|---|---|---|
| Phoenix group holdings | 10.7% | eleven% |
| M&G | 8.9% | 10.2% |
| Unilever | 3.9% | 4.2% |
Reliable cash flows and strong balance sheets have allowed these companies to grow their dividends consistently over time. And city analysts expect this record to continue for at least the next two years, as shown in the table below.
| Stock | 2024 dividend per share | Dividend per share 2025 |
|---|---|---|
| Phoenix group holdings | 54.2p | 56.1p |
| M&G | 21p | 25.1p |
| Unilever | 151.7p | 160.4p |
Dividends are never, ever guaranteed. But if these forecasts prove correct, £15,000 invested equally in these Footsie shares would generate £1,157 of passive income for me this year.
In my opinion, it's a pretty decent performance. But I'm not done yet: the figure rises to £1,270 by 2025.
Growth opportunities
I don't have unlimited funds available to buy UK shares. However, I hope to add Phoenix and M&G to my portfolio sooner rather than later.
There is no guarantee that these companies will generate the long-term returns I expect. Competition in the financial services sector is intense. What's more, they could struggle to grow profits in the short and medium term if difficult economic conditions persist.
However, the long-term prospects for both businesses remain quite interesting. And this makes them the best investments. I believe demand for its life insurance, retirement and wealth products will steadily increase as Britain's elderly population grows rapidly.
And in the meantime, their strong balance sheets should allow them to continue paying huge dividends. The Solvency II capital ratios of M&G and Phoenix stand at a significant 199% and 180% respectively, the latest financial data shows.
Brand Hero
Consumer goods giant Unilever has one of the biggest dividend records in the FTSE 100. It has increased annual payouts for more than 30 years.
This is largely due to its diversified business model, which in turn helps prevent earnings shocks. It sells products in multiple categories, from soap and laundry detergent to deodorants, food and bleach. Its global footprint also helps protect it against problems in one or two regions.
Unilever's huge portfolio of winning brands also makes it a brilliant investment today. Tags like Pigeon, Magnum and Hellmann's They are market leaders and the company can constantly increase prices to boost sales.
Local and independent labels are constantly gaining popularity. But growing demand for its powerful brands in emerging markets means Unilever remains a top long-term buy for me.
