Building a robust stream of passive income requires more than just high yields; it demands resilience, strong cash flow, and market-leading stability. While low-interest savings accounts offer safety and alternative ventures promise high returns, FTSE 100 dividend shares often present a compelling middle ground for long-term income investors.
The UK’s premier index is home to dozens of mature, cash-generative companies with a proven history of rewarding shareholders. Though past performance is no guarantee—as the pandemic’s dividend suspensions reminded us—selecting companies with defensive qualities and strong balance sheets can help build a durable income portfolio.
Here are three FTSE 100 shares worthy of research for those looking to bolster their passive income this September.
1. BAE Systems (LSE: BA.): Defence in Depth
In an era of heightened geopolitical uncertainty, defence giants like BAE Systems offer a unique combination of defensive operations and growth potential. Governments prioritise national security regardless of economic cycles, creating persistent demand for BAE’s advanced military technology, from combat vehicles to cybersecurity and naval systems.
This non-cyclical nature was proven during the COVID-19 pandemic when BAE famously continued to raise its dividends while other sectors cut back. With key NATO allies significantly increasing defence budgets, the company’s order backlog is robust, providing excellent visibility for future earnings and dividend payments.
A primary risk involves the complex, high-stakes nature of its contracts, where technical failures or cost overruns could impact profitability. However, its long-term partnerships with governments mitigate this considerably. Currently offering a forward dividend yield of 2.3%, BAE Systems is a strong candidate for a core holding focused on steady, growing income.
For deeper analysis on the global defence sector, investors can read reports from Janes, a leading authority on defence intelligence.
2. Phoenix Group (LSE: PHNX): A High-Yield Powerhouse
For income seekers, Phoenix Group stands out as a FTSE 100 leader. This life insurance and pensions consolidator is structured to be a cash-generating machine, using its scale to manage closed books of business efficiently. Its impressive track record of growing dividends for over a decade speaks to a management team committed to shareholder returns.
The yield is undeniably attractive, with analysts forecasting a figure north of 10% for the coming year. Such a high yield often signals market skepticism, but Phoenix’s robust capital position provides confidence. Its Solvency II coverage ratio remains strong (around 180%), indicating more than enough capital to meet its obligations and sustain its generous dividend policy.
The main challenge is navigating a low-growth environment for its legacy books, but its focus on capital efficiency and strategic acquisitions helps manage this. For investors willing to accept the slower growth typical of financial services firms, Phoenix offers a powerful yield for passive income.
Investors can compare Phoenix’s metrics with industry standards using data from the Bank of England’s financial stability reports.
3. Unite Group (LSE: UTG): Property Income with a Niche
Real Estate Investment Trusts (REITs) are natural picks for income portfolios due to their legal obligation to distribute 90% of rental profits as dividends. Unite Group distinguishes itself by specializing in a particularly resilient niche: purpose-built student accommodation (PBSA).
The fundamental demand for university education, especially from international students who pay premium rents, provides a defensive backbone. Coupled with a chronic shortage of quality housing in UK university cities, Unite enjoys high occupancy rates and strong rental growth.
While rising interest rates pose a challenge to property valuations sector-wide, Unite’s high-quality asset portfolio and fixed-rate debt structure help insulate it. With a forward dividend yield of around 4.1%, Unite offers a way to access reliable property income backed by the enduring demand for education.
Those interested in the student property market can find valuable research on the Knight Frank UK website, which regularly publishes analyses on the sector.
