Passive income shares might not be grabbing the headlines this week, with investors instead transfixed by the turmoil engulfing Nvidia.
The AI giant’s shares have plunged following the shock resignation of CEO Jensen Huang amid revelations of extramarital affairs, wiping hundreds of billions off its market value.
But while everyone watches US stocks, I’ve been putting my money somewhere rather different. This week, I finally opened positions in two FTSE 100 shares offering an average dividend yield of 5.7%.
Neither’s likely to deliver Nvidia-style growth. But both offer something I’m increasingly keen to build into my portfolio: a potentially lucrative stream of dividends.
Oil prices higher for longer?
My first purchase was BP (LSE: BP.), offering a 4.4% dividend yield, as I write on Friday afternoon (13 November).
The oil giant has enjoyed a remarkable share price recovery, fuelled by surging energy prices amid the ongoing Iran war.
My thesis? Even if the conflict ends tomorrow, restoring damaged infrastructure, rebuilding inventories, and normalising shipping routes could take months.
And recent forecasts support this view. The US Energy Information Administration (EIA) now expects Brent crude to average $85.78 per barrel in 2027, up from $64.76 in its July forecast.
The heightened risk of supply disruptions and longer shipping routes will limit the near-term impact of global stock builds until geopolitical risk dissipates and inventories begin to return closer to pre-conflict levels.
US EIA, November 2026 Short Term Energy Outlook report
For BP, the potential earnings implications are substantial:
- EIA 2027 Brent forecast in July 2026: $64.76 per barrel.
- EIA 2027 Brent forecast in November 2026: $85.78 per barrel.
- BP estimated pre-tax profit impact of $1 change in Brent: $340m.
- Implied pre-tax profit impact of updated EIA forecast: $7.1bn in additional pre-tax profit.
Valuing energy shares is notoriously difficult given volatile commodity prices and cyclical earnings, but I’m confident that BP can continue generating strong profits into the future.
Of course, oil prices could retreat faster than expected, while BP faces significant investment requirements and operational risks. Nevertheless, with shares trading on a price-to-earnings (P/E) ratio of 13, I’m comfortable taking a long-term position.
A dividend heavyweight
My second purchase was Legal & General (LSE: LGEN), offering a hefty 6.9% dividend yield. I think the insurer could benefit from higher-for-longer interest rates and continued consolidation across the UK pensions market.
Its latest half-year results were encouraging. Core operating earnings per share climbed 11%, while management continues targeting over £5bn in shareholder returns between 2025 and 2027.
At 316p, the stock trades on a forward P/E ratio of around 12.2 which I think makes it good value relative to rival Aviva, which trades marginally higher at around 13.3 today.
But it’s the passive income potential that really excites me. A £10,000 investment generating a 6.9% annual return, reinvested at the same rate for 30 years, could grow to around £74,000 in the future.
Stop reinvesting, and that investment could potentially generate over £5,100 in annual dividends, assuming the same yield.
Naturally, dividends and share prices fluctuate, so those returns are far from guaranteed especially given the significant capital requirements and investment volatility the company faces.
Nevertheless, its attractive valuation and exposure to pension consolidation earned the stock a spot in my portfolio.
Key takeaway
It’s easy to get swept up in the excitement of AI stocks and the drama surrounding Nvidia this week.
While investors remain glued to their screens and watching the see-sawing US tech stocks, I’ll continue to diversify my portfolio and build a sustainable passive income with high-quality stocks like BP and Legal & General in coming weeks.
Should you invest £5,000 in Legal & General Group Plc right now?
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Ken Hall owns shares in BP and Legal & General.
This story originally appeared on Motley Fool
