Image source: Getty Images
With the new tax year having just begun, Stocks and Shares ISA investors have a fresh £20,000 annual contribution limit to make use of. For those looking to make a huge passive income, I think the following two top dividend shares are worth serious attention:
| Dividend stock | Forward dividend yield |
|---|---|
| Henderson High Income Trust (LSE:HHI) | 6.5% |
| M&G (LSE:MNG) | 10.9% |
If broker forecasts are correct, someone who spreads a £20k lump sum equally across these UK stocks would make a £1,740 passive income over the course of 2025. I’m optimistic each will have what it takes to deliver a growing dividend over time too.
While bearing in mind that dividends are never guaranteed, here’s why I think these passive income shares merit serious consideration.
A trusted dividend payer
The Henderson High Income Trust has grown the annual dividend for 12 consecutive years on the spin. Past performance isn’t always a reliable guide to the future. However, this suggests it could be a good investment to consider in these uncertain times.
The trust’s resilience is thanks in part to the way it’s structured. Around 80% of it is invested in mid- and large-cap equities, with the remainder locked into fixed income securities (ie bonds).
This makes it a dependable source of dividend income, while also providing scope to deliver capital growth. Major holdings here include FTSE 100 dividend royalty British American Tobacco, HSBC, Rio Tinto and Unilever.
More than 88% of the fund is tied up in London-listed shares, which could leave it vulnerable if investor appetite for UK assets darkens. But on the whole, I think it’s a rock-solid dividend share to consider.
Biggest FTSE 100 yield
Profits at financial services business M&G could be vulneable if economic conditions cool sharply. While this could have substantial ramifications for the share price, I’d still expect the FTSE 100 company to keep on growing annual dividends (bar some catastrophic event).
This is thanks largely to the asset manager’s cash-stacked balance sheet. Its Solvency II capital ratio was more than double the regulatory requirement at the end of 2024, at 223%.
I believe this should give M&G the means and confidence to pay a large and growing dividend even if profit disappoint. A strong balance sheet’s especially essential right now. The predicted dividend for 2025 is covered just 1.2 times by expected earnings this year.
The firm’s robust financial foundations have allowed it to raise the dividend each year since it split from Prudential in 2019. And it remains committed to widescale cost-cutting to keep its balance sheet in tip-top shape (it hiked its cost reduction target again at the end of last year, to £230m by the end of this year).
Recent share price weakness means M&G shares now have the highest yield on the FTSE 100. I think it could be one of the best blue-chip dividend stocks to consider today.
