Like many older investors (I’m 58), I’m a big fan of passive income. I love seeing ‘free money’ rolling in almost every day, and even while I sleep. Indeed, a fair chunk of my family portfolio is dedicated to generating unearned income, particularly the cash dividends paid by FTSE 100 and FTSE 250 shares.
But I recently noticed I’ve missed a trick…
Powerful passive pounds
Earlier this week, I was reading through the latest edition of Dividend Dashboard, an excellent quarterly review of UK dividends. For 2026, City analysts forecast that FTSE 100 firms will pay a record £90.3bn in dividends to shareholders.
One problem with these Footsie cash payouts is they’re highly concentrated. For example, the top 10 dividend payers could account for more 52% of 2026’s FTSE 100 dividends. Also, the top 20 account for 70% of the estimated total.
While noting that future dividends aren’t guaranteed, so can be cut or cancelled at short notice, the table below shows the UK stock market’s five biggest dividend payers are:
| Company | Industry | Expected payout in 2026 |
| HSBC Holdings | Finance | £10.8bn |
| Shell | Energy | £6.6bn |
| British American Tobacco | Tobacco | £5.3bn |
| Rio Tinto | Mining | £4.6bn |
| BP | Energy | £3.9bn |
Together, these five dividend dynamos are expected to pay out £31.2bn this calendar year. That’s more than a third (34.6%) of forecast FTSE 100 dividends for 2026.
However, I see that my family portfolio owns only two of these five stocks: Anglo–Australian miner Rio Tinto and oil & gas giant BP. My wife refuses to own tobacco stocks, so perhaps we should add HSBC Holdings‘ (LSE: HSBA) shares to our portfolio for extra dividends?
Eastern promise
Although HSBC owns HSBC UK and digital-based bank First Direct, the vast majority of its profits are made overseas. The group has 41m customers across 56 different countries, with huge operations in Hong Kong and mainland China.
As I write, this global bank’s shares trade at 1,450.8p, valuing the group at a whopping £247.9bn. This makes HSBC the UK’s largest listed company by a long way. What’s more, the shares are up 37.3% over one year and have soared by 245.8% over five years — and those returns exclude the bank’s juicy dividends.
Given HSBC’s strong share price strength in recent years, I’m worried that I might have missed the boat. Even worse, I’m kicking myself for not buying into this Footsie firm back in November 2022, when the share price dipped to 490p. Oops.
That said, the shares have been even higher, peaking at a record 1,610p on 4 August. Right now, they trade on 13.7 times historic earnings, delivering an earnings yield of 7.3%. This means that their above-average dividend yield of 3.8% a year is covered 1.9 times by trailing earnings — a healthy margin of safety.
To me, these are not exactly the fundamentals of a nailed-on value stock or bargain buy. Indeed, other big British bank shares are cheaper, but lack exposure to the booming economies of the Far East and Asia. Furthermore, my family portfolio already owns stakes in Barclays, Lloyds Banking Group and JPMorgan Chase & Co (America’s biggest bank).
In summary, I’ll pass on buying shares in HSBC — unless my wife overrules me, that is! However, other income investors and dividend devotees could consider owning this stock as part of a well-diversified, dividend-focused portfolio.
New red alert for income investors!
What income stock do we like better than HSBC Holdings right now?
One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.
And the best bit is that you can see if for yourself, right now, absolutely free of charge!
No jargon. No hard sell. Just a clear look at an income share we think is worth your time.
Cliff D’Arcy has an economic interest in Barclays, BP, JPMorgan Chase & Co, Lloyds Banking Group and Rio Tinto shares.
This story originally appeared on Motley Fool
