I think someone searching for above-average passive income streams should consider the following FTSE 100 and FTSE 250 stocks. Here’s why.
Fresnillo
Buying gold and silver stocks could be a something to think about in the current uncertain climate. And I think FTSE 100-listed Fresnillo could be a particularly attractive option for dividend investors to consider.
At 4.1%, its forward dividend yield is comfortably above the 3.3% average for UK shares.
Precious metals prices have fallen sharply from last week’s record peaks around $3,170 per ounce. They could drop further from current levels of $3,010 too, such is the volatile nature of commodity markets.
But I’m optimistic that underlying gold demand remains strong, and think gold prices could bounce higher again given heightened macroeconomic and geopolitical fears. According to the World Gold Council, gold-backed exchange-traded funds (ETFs) recorded further inflows in March, taking total holdings (of 3,445 tonnes) to their highest since May 2023.
Against this backdrop, I think Fresnillo shares could deliver more robust capital gains alongside a healthy passive income.
Bluefield Solar Income Fund
More recently, the returns on renewable energy stocks have been largely mediocre. Higher interest rates than we’ve been accustomed to post-2008 have weighed on asset values and pushed share prices down.
Bluefield Solar Income is one renewables specialist whose price has trended lower since late 2022. But with interest rates tipped to fall, now could be the time to consider picking up some shares.
They could prove especially sound investments as demand for non-cyclical assets is on the rise. This particular FTSE 250 fund appeals to me as well because of its enormous 10% dividend yield.
Bluefield — which owns solar and wind assets chiefly in the UK — also has significant long-term growth potential as renewables steadily take over from fossil fuels. I think it’s worth considering, even though there’s no guarantee of more Bank of England rate cuts.
Phoenix Group
Without doubt, my favourite selection among these three dividend shares is Phoenix Group (LSE:PHNX). At 11%, it has the second-highest yield on the FTSE 100 right now.
Ultra-high dividend yields are sometimes unsustainable, and investors who buy such high-paying shares can get caught out over the long term. But I’ve no such concerns with this blue chip.
It’s paid a large and growing dividend since 2019, even during the Covid-19 period and extreme earnings volatility. Cash generation is exceptional, and in 2024 it delivered operating cash generation of £1.4bn, a full two years ahead of plan.
With strong financial foundations — Phoenix’s Solvency II capital ratio sits at a formidable 172% — it looks in great shape to keep this record going.
I’m also encouraged by the firm’s substantial long-term earnings opportunities and their potential influence on future payouts. Okay, it faces significant competition that could impact sales volumes and damage pricing. But I’m optimistic that profits could surge as the UK’s booming elderly population drives demand for retirement products.
And in the meantime, that cash-rich balance sheet should help it keep paying market-beating dividends even if consumer spending slips and earnings come under pressure.
