10% down per month for a 10% yield! Is this stock a passive buy for secondary income?

Phoenix Group Holdings share price (LSE: PHNX) could be an excellent stock for investors looking to get the maximum amount of secondary income they can.

Annuities, savings, and life insurance offer a high yield of return on FTSE 100it currently pays 10.18% annually. Even better, for bargain hunters, the price of Phoenix has dropped 10.49% in the past month. That means lower entry fee, higher revenue.

I bought a Phoenix in January and again in March. Should I take this opportunity to make it a hat-trick of purchases?

Stellar FTSE 100 dividend stocks

I have received two dividend payments and the third one will go into my account on October 31st. For a while, I was enjoying the stock price growth, but alas, last month's sell-off changed that and I'm back where I started.

If today's yield holds, I will double my money in just seven years. Phoenix has a somewhat better record of dividend growth, as this chart shows.

Chart with TradingView

However, there is an obvious problem. Will the stock price ever increase? And this begs the second question. Does it matter if not?

In fairness, Phoenix shares are up 11.14% over the past year. The downside is that they are down 25.72% over five years. That double-digit production won't look infallible if my money is eroding at the same time.

At first glance, the markets seem tough in Phoenix. For the full year 2023, it delivered a strong 13% rise in IFRS-adjusted operating profit to £617m, driven by strong growth in its pensions and savings business.

It appears to be starting 2024 in the same vein, posting a 15% rise in first-quarter adjusted operating profit to £360m on 16 September. However, the company's accounts are a little trickier to understand, and the headline after tax showed a loss of £646m. The board pinned that “negative economic diversification from high interest rates and global equities resulting from our SII protectionist approach”. Maybe the markets aren't so tough in Phoenix after all.

I would like to see an increase in the price of Phoenix shares

The dividend still looks strong as first half net income jumped 5.8% to £950m. Phoenix now aims to hit the high end of its target range of £1.4bn to £1.5bn by 2024.

Shares may be boosted as analysts predict rates will rise from 5.7% to 13% this year. The 14 analysts providing one-year price targets have an average estimate of 575.5p per share, up 11.14% from today's 517.5p. That's probably as much as we can hope for, but it can provide a total return of more than 20%. That's if it's okay.

Despite last month's dip, Phoenix doesn't look particularly cheap, trading at 15.78 times earnings, roughly in line with the FTSE 100's price-to-earnings ratio. The price-to-sales ratio is 1.1, meaning investors are paying 110p for every £1 sale.

The company needs to grow to please investors, but it operates in a mature and competitive market, in an uncertain time. It may be difficult to deliver.

I won't sell my Phoenix shares, but I won't buy any more today. They offer a good second income, but I'm not sure I could survive on dividends alone.