A drop of 12% per month and a return of 10.7%! Is this the best passive income stock for November?

October was quite a difficult month for my portfolio, including one of my favorites FTS 100 Profitable shares of all: Phoenix Group Holdings (LSE: PHNX). Over the month it fell by 12.12%. Although I’m pleasantly surprised to see that it’s still up 8.24% for the year.

I bought Phoenix for the obvious reason that it produces one of the most stunning returns on the blue chip index.

I invested three times in 2024: £1,200 on 30 January, £1,500 on 4 March and £500 on 7 July. These are small and strange amounts to me, but I have been collecting cash in my portfolio to make sure I am fully invested.

Could the share price rise from here?

The main attraction was its mega-yield, which was well above 9% at the time. I took a closer look at its accounts and it looked like its dividend was holding up because management had raised it in eight of the previous 10 years. Let’s see what the graph says.

TradingView Chart

I knew I was taking a risk. If earnings fall or cash flows are reduced, cutting the dividend will be an obvious target for the board.

At the time, Phoenix’s stock price looked pretty good. This combination of sky-high profitability and low valuations has characterized a number of FTSE financial services companies, most notably the insurer. Aviva and asset manager M&G.

All three companies have fallen out of favor as volatile stock markets discourage investors, cause client outflows and reduce the value of assets under management.

Higher interest rates also reduced the appeal of dividend stocks, as investors could earn decent returns on cash and bonds without any of the capital risk that comes with stocks…even blue chips like these three.

It didn’t bother me too much. I assumed that at some point interest rates would fall, and when that happened, Phoenix would have to re-rate.

I plan to hold Phoenix for many years while reinvesting all dividends. Assuming today’s returns generally continue (there are no guarantees), I double my money in less than eight years, even if the stock doesn’t rise at all.

I can’t resist this huge dividend

But what if they fall? In fact, they have just done so, following a tough month for the FTSE amid autumn budget tensions and the looming US presidential election on 5 November.

Hopes for lower interest rates have been dashed again as the US economy moves forward. That pushed up bond and savings rates, hitting Phoenix. My Phoenix shares are down 4.17% since I bought them, but my original £3,200 is now worth £3,415.

This is due to the two dividends I received during this time, namely £135.96 on 24 May and £168.42 on 31 October. After reinvesting them, my return was a modest 6.7%. This despite a double-digit drop last month.

Dividends are not guaranteed, but I save them after payment. Phoenix shares are now yielding a whopping 10.72%. It’s huge and looks even more vulnerable. Economic uncertainty can hit incomes. Recent stock market volatility may reduce assets under management. The board may simply decide that it is paying too much.

But I still think this failure is a fantastic opportunity to put some more money into Phoenix, and that’s what I’m going to do. I can’t resist this passive income.