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Earlier as we speak, whereas sifting via the highest-yielding shares within the UK’s FTSE 100 index, I discovered 10 Footsie shares with dividend yields exceeding 7.4% a yr. Good.
Scrumptious dividends
Whereas the blue-chip index at the moment presents a dividend yield of 4% a yr, the typical money yield throughout these 10 dividend dynamos involves a tidy 8.9% a yr.
What’s extra, I noticed that my household portfolio contains 4 of the 5 highest-yielding FTSE 100 shares. That’s as a result of as an old-school worth investor, I really like to look at my dividends rolling in.
For the file, listed below are 4 Footsie ‘dividend kings’ we personal for his or her cash-generating powers:
| Firm | Sector | Market cap | Share value | One-year change | 5-year change | Dividend yield |
| Vodafone | Telecoms | £21.7bn | 70.4p | -20.7% | -54.0% | 11.0% |
| Phoenix Group | Insurance coverage | £5.3bn | 518.6p | -16.4% | -14.7% | 9.9% |
| M&G | Asset administration | £5.3bn | 225p | +17.3% | 0.0%* | 8.9% |
| Authorized & Basic | Asset administration | £14.7bn | 243.8p | -5.5% | +0.3% | 8.0% |
Dividend dynamos
Why do these FTSE corporations pay out such excessive dividends, averaging 9.5% a yr throughout the 4?
For telecoms big Vodafone Group, it’s clear why it presents a double-digit dividend yield. For the previous 5 years, the group has paid an unchanged dividend of 9 US cents per share. In the meantime, its share value has greater than halved over 5 years, sending its dividend yield skywards.
Phoenix Group — a number one supervisor of closed pension and insurance coverage funds — has billions of kilos of spare capital on its stability sheet. This money pile allows it to maintain funnelling floods of money to shareholders. Certainly, analysts anticipate its dividend to rise over the subsequent two years.
It’s an analogous story at 93-year-old funding supervisor M&G, which floated in London in late 2019. M&G has paid a market-beating dividend yield ever since, but its shares are 225p as we speak — matching their float value.
The ‘high-yielding monetary shares’ theme continues at storied funding supervisor Authorized & Basic Group, based in 1837. As with Phoenix and M&G, L&G’s capital power permits it to pour money into its homeowners’ pockets. Impressively, L&G even held its dividend in the course of the Covid-19 disaster of 2020-21.
Dividends aren’t ‘straightforward cash’
Dividend investing could sound like a simple path to riches, however historical past has taught me in any other case. Future dividends aren’t assured, to allow them to be reduce or cancelled with out discover. Certainly, dozens of FTSE 100 corporations diminished or withdrew their payouts when coronavirus collapsed inventory markets.
Moreover, ultra-high money yields typically don’t final. Some firms reduce dividends with a purpose to strengthen their stability sheets or spend money on future development. Additionally, when share costs rise, this drives down dividend yields.
Lastly, although dividend investing isn’t for everybody, it really works for me and my spouse. Presently, we reinvest our dividends, shopping for extra shares to spice up our future returns. However once we retire, we’ll use this money to offset our residing bills. And that’s why FTSE 100 dividends are a win-win for us!
