How Am I Targeting An Annual Passive Income Of £14,754 From Just A £20,000 Holding In This Ftse Financial Giant?

Passive income is one of the simplest financial ideas to grasp — making money with minimal effort. Yet it remains one of the hardest for investors to execute consistently well, in my view.

The key for passive income made from shares is not chasing the highest yield. It is understanding which companies generate the steady, recurring cash that can support those payouts.

And that is where the market often gets things wrong, especially with businesses that look far riskier on the surface than they really are.

How solidâs the underlying business?

One FTSE company that suffers from this kind of misunderstanding is M&G (LSE: MNG). At first glance, it looks like a traditional fund manager exposed to market swings, fee pressure, and unpredictable client flows.

But that impression is misleading. M&G is a hybrid business with several different engines of cash generation, many far more stable than investors assume.

The group combines a capitalâlight assetâmanagement arm with capitalâheavy lifeâinsurance and annuity operations. These are all supported by a large balance sheet generating recurring investment income.

This mix gives the company multiple and independent sources of cash flow â fee income, insurance profits, and surplus capital generation. And it is this hybrid structure, rather than any single line of business, that makes M&G capable of supporting a high, sustained level of passive income.

How are these factors working now?

All these factors can be seen at play in M&Gâs 2025 annual numbers released on 12 March. Net flows from open business swung to a £7.8bn inflow from a £1.9bn outflow the year before. The turnaround highlights the strength of both the assetâmanagement and life businesses in attracting new money.

Adjusted operating profit remained stable at £838m, illustrating how M&Gâs diversified mix of fee income, insurance profits and investment returns helps smooth volatility.

A risk for M&G is sustained bearishness in financial markets that could pressure assets under management and fee income. Another is any tightening of regulatory capital requirements, which could hamper its ability to deploy capital freely in volatile conditions.

Nonetheless, analysts forecast its earnings will grow by a whopping annual average of 31.2% to end-2028. And it is growth here that powers any companyâs dividends over the long run.

How much passive income can be made?

Analysts forecast M&Gâs dividend yields increasing to 7.1% this year, 7.3% next year, and 7.6% in 2028.

So, a £20,000 holding in M&G (the same as mine) would make £22,663 in dividends after 10 years and £174,133 after 30 years. The numbers assume the forecast 7.6% yield as an average, although this can go down as well as up. They also assume the dividends are reinvested back into the stock to harness the turbocharging effect of âdividend compoundingâ.

At the end of that time, the holding could be worth £194,133. And this would pay a yearly passive income of £14,754!

My investment view

M&Gâs hybrid model gives it multiple levers to support and grow its dividend, even when markets are unsettled.

For investors seeking longâterm passive income, that combination of stability, yield and compounding potential is hard to ignore.

And I for one will be adding to my holding in the stock as soon as possible. I also have my eye on other high-yielding stocks in other sectors.

The post How am I targeting an annual passive income of £14,754 from just a £20,000 holding in this FTSE financial giant? appeared first on The Motley Fool UK.

More reading

• How much do you need in an ISA or SIPP to target a £997 monthly income?
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• How £500 unlocks £34.05 passive income with this 6.81% yielding stock
• Want to start investing in the stock market? Have a spare £200 or £300?
• Hereâs what happened to £1,000 invested in the past 2 stock market crashes

Simon Watkins has positions in M&g Plc. The Motley Fool UK has recommended M&g Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.