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2018 was apprently the best year for passive income investors ever, with a record total of £85.2bn paid in dividends by FTSE 100 companies.
According to AJ Bell‘s Dividend Dashboard, which surveys analyst forecasts, 2025 is unlikely to beat that. But it could come close, with projections for £83bn. We also have £28.9bn in FTSE 100 buyback plans so far. That’s more than half of 2024’s total, and we’re only just past the first quarter.
Forecasts suggest this could lead into a new all-time record in 2026. Passive income investors might never have had it so good.
Check the track record
Dividends are never guaranteed. And a dividend cut can often be one of the first remedies when a company is feeling the pinch one year.
So I reckon the best way to try to reduce our risks is to look for two more things in addition to a decent yield. One is to see the mooted dividend cash covered by forecast earnings. And a good track record record of consistent payouts helps.
Taylor Wimpey (LSE: TW.) scores well on both. Forecasts suggest a 9% dividend yield with cover of around 1.6 times by earnings. And the company has kept its dividend going through these past few tough years.
Along with the rest of the UK’s house builders, Taylor Wimpey still faces pressure from high interest rates and expensive mortgages. But we’re already seeing lenders dropping their rates. It comes as expectations grow for deeper Bank of England cuts in response to US tariff protectionism.
2025 outlook
Taylor Wimpey reached the end of 2024 with net cash of £565m on the balance sheet, ahead of expectations. That helps support the company’s policy of returning 7.5% of net assets per year as ordinary dividends.
The 2024 dividend was slightly short of 2023’s, though, even with a high yield. Further interest rate pressure and potential asset weakness could be among the threats this year. And I suspect we could see further share price weakness until we have some serious interest rate cuts.
But with a long-term view, if I didn’t already hold housebuilder shares I’d be wanting some Taylor Wimpey now. In fact, I still might buy.
Insurance cash
The insurance business can be cyclical. And quite often, dividends can go a few years without being covered by earnings. But at Aviva (LSE: AV.) we’re looking at a forecast 7.2% yield covered 1.2 times by projected earnings.
Cover isn’t up with some in the FTSE 100. But it’s pretty respectable for the sector. I like the look of the 9.3% expected from Legal & General too. But its weaker expected cover of 0.9 times gives Aviva the edge for me just now.
Aviva has kept its dividend going through these high-inflation years too, as it comes through its restructuring process in apparently good shape.
The ever-present cyclical risk is here. And financial stocks in general tend to suffer in an economic downturn, which US trade wars could thrust upon us.
But for long-term passive income, I see it as another strong one to consider.
