As big fans of passive income, my wife and I love dividend shares that pay out lots of cash dividends to shareholders. While we’re working, we reinvest this cash into more shares. When we come to retire, we’ll use these proceeds to pay our expenses.
Two delicious dividend shares
From July 2022 to August 2023, we built a new portfolio to produce powerful dividend income. This includes 27 shares — 15 from the FTSE 100, five from the FTSE 250, and seven from the US S&P 500 index.
For example, here are two high-yielding Footsie stocks we own that throw piles of cash at shareholders:
1. Vodafone
Today, Vodafone Group (LSE: VOD) shares look a complete mess. A year ago, my wife and I bought into this telecoms giant at 89.4p a share.
At first, the shares took off, hitting their 2023 high of 103.24p on 21 February. This stock has crashed since, hitting a 27-year low of 64.97p on Wednesday, 13 December.
Currently, the share price stands at 67.07p, valuing the group at £17.7bn. This is down 22.3% over one year and 58.3% lower over five years. However, these figures exclude dividends, which are huge.
Vodafone is now the FTSE 100’s highest-yielding share, paying 11.6% a year in cash. Alas, history has taught me that double-digit dividend yields rarely last. Either payouts get cut, or share prices surge and yields drops back.
As a shareholder, I’m hopeful that Vodafone will recover in 2024. Then again, this stock has been a value trap for shareholders for a decade. Also, growth in the European telecoms sector has been weak.
Even so, we intend to hang onto these dividend shares for now. But if Vodafone keeps showing signs of weakness, then I won’t hesitate to hang up on this stock.
2. Phoenix
My second FTSE 100 dividend dynamo is Phoenix Group Holdings (LSE: PHNX). This buys, manages, and runs off legacy pension and insurance funds. Right now, business is booming in the market for pension buyouts.
At their 52-week high, Phoenix shares peaked at 647p on 2 February. They then collapsed, bottoming out at 436.4p on 25 October. How I wish I was able to buy at such low prices.
As I write, the stock trades at 514.58p, valuing this company at £5.2bn. Despite this recent rebound, the share price is down 16.4% over one year and 8.8% over half a decade. Again, these figures exclude dividends.
My wife and I paid 544.4p a share for our Phoenix holding in August. However, we have already been paid a dividend of 26p a share on 23 October, which we reinvested into more shares at a discount price.
As with Vodafone stock, Phoenix shares pay a double-digit dividend: 10.1% a year. Furthermore, the group has enough spare capital at hand to pay this yield for at least two more years.
Thus, even if Phoenix’s share price goes nowhere, I expect to earn over 10% a year from dividends alone. That’s very appealing, even though I know that dividends are not guaranteed, so they can be cut or cancelled at any time.
Finally, I could be wrong, especially if 2024 turns out to be a worse year for the economy and shares. But as my investing horizon is decades, I’m not worried about one bad year!
