Passive revenue is cash I don’t must work for. It arrives month after month, yr after yr, with out me having to carry a finger. Ideally, it can rise steadily over time too.

It sounds an exquisite, unattainable factor, however in truth I can get it by investing in FTSE 100 shares that pay common dividends to traders. Firms listed on the UK blue-chip index at the moment yield 3.6% a yr on common. Some pay as a lot as 7%, 8% or 9%.

Higher nonetheless, as a result of corporations purpose to extend their dividends as income rise, my second revenue stream ought to develop over time.

I’m shopping for dividend shares to safe my retirement

By reinvesting each dividend I obtain, I purchase extra shares, which pay me extra dividends, which pay extra revenue in an countless virtuous cycle.

Additionally, if the share costs of these corporations rise, so will the worth of my capital, making me even higher off.

None of that is assured and I might lose in addition to acquire. However I’ve constructed a portfolio of round 20 shares, so if some underperform, others will hopefully greater than compensate.

One among in the present day’s most spectacular FTSE dividend revenue shares is insurance coverage conglomerate Phoenix Group Holdings (LSE: PHNX), which I at the moment maintain. It has a scarcely plausible trailing yield of 10.5%. That’s greater than double the most effective instantaneous entry financial savings account, with potential share price development on high.

It’s not strictly truthful to match a inventory with a financial savings account. With shares, my capital is in danger. Additionally, as talked about, dividend revenue isn’t assured. Phoenix has a strong observe document although, climbing shareholder payouts in eight of the final 10 years, as this chart exhibits.

Chart by TradingView

Phoenix generates sufficient money to fund that stonking yield however appears to be doing effectively in the present day. Within the first half, whole money technology jumped 5.8% to £950m. Throughout 2024, the board expects to hit the highest finish of its £1.4bn-£1.5bn goal vary.

Sooner or later I believe the share price will fly

The Phoenix share price has gone almost-sideways during the last yr, rising simply 1.54%. It’s down 30.54% over 5 years.

This has been a bumpy interval for FTSE 100 monetary shares, however I’m hoping they kick on when rates of interest fall additional and the economic system picks up. Whereas I wait, my reinvested dividends will purchase extra Phoenix inventory on the decrease price.

I’m balancing my stake in Phoenix with shares that pay much less revenue however supply increased capital development prospects.

By doing this, I’d hope to yield round 6% a yr and revel in common capital development of one other 5%. That’s formidable but when I handle that it could give me a complete common annual return of 11%.

Investing is a long-term sport however the rewards are big given time. If I had £2,000 at my disposal in the present day, and left it invested for 35 years, a mean annual return of 11% might flip it into a formidable £77,150.

That 6% yield would generate passive revenue of £4,629 a yr, greater than double the quantity I put in. And I’ll get it yearly for all times with luck, with out touching my capital.

My figures are crude however present how investing in shares can generate long-term passive revenue. And I actually wouldn’t cease at investing £2,000.