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Invest in the FTSE 100 Index It has proven to be an exceptional way for investors to earn a second income over the years.
London's main stock index is packed with financially strong companies with market-leading positions in established sectors. When combined, these qualities can generate large, reliable dividends over time.
Today, the average forward dividend yield on Footsie shares stands at 3.5%. Not bad. In fact, it is more than double the 1.1% yield on Footsie shares. S&P 500 Index stocks, for example.
Based on this, a lump sum investment of £9,000 today could earn me a total of £630 in passive income in 2025 and 2026. But I believe I can get better results by buying shares in Vistry Group (LSE:VTY) and Phoenix Group (LSE: PHNX).
Dividends are never guaranteed, but if the City's forecasts are accurate, you'd be in for a big dividend. £1,400 in dividends this year and next by distributing this lump sum between these two stocks.
This is why I would buy them if I had extra money to invest.
Impressive dividend growth
Vistry Group: Total dividend income for 2025 and 2026: £504
For the coming year, Vistry Group's dividend yield is expected to outperform the FTSE 100 index at 4.8%. Coupled with the potential for further share price gains, I believe the builder could deliver an excellent overall return.
What really excites me is the potential for strong, sustained payout growth following the (expected) return of dividends in 2024. Brokers believe dividends will soar 42% next year and 32% in 2026.
This raises the yield to 6.4%.
Trading performance is improving rapidly as the UK property market recovers, supporting these positive outlooks. Vistry’s operating profit rose 10% in the first half, while property completions advanced 9%.
There is no guarantee that this recovery will continue, especially if the domestic economy slows, so risks remain. But with interest rates projected to continue to fall, I think the outlook for homebuilders like this one is encouraging.
And with the new government pledging to increase the supply of affordable housing, specialists in this area like Vistry have good long-term prospects.
10.1% dividend yield
Phoenix Group: Total dividend income for 2025 and 2026: £896
Financial services giant Phoenix Group is also expected to increase its dividend in the short to medium term, with annual increases of 3% forecast for each of the next two years.
As a result, the dividend yields for 2025 and 2026 are truly astonishing: 9.8% and 10.1% respectively. almost three times The current average rate of advance of the Footsie.
Like Vistry, Phoenix's earnings are sensitive to changes in interest rates and its trajectory could easily be derailed. But thanks to a strong balance sheet, I don't expect the Bank of England's policy decisions to impact dividends at least in the near term. The company's Solvency II capital ratio was an excellent 176% in June.
This was near the high end of their 140% to 180% target.
I back the FTSE 100 company to continue to deliver market-beating rewards beyond 2026. This will be driven by a likely surge in pension demand as the UK population ages rapidly.
