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The FTSE 100 is residence to a big selection of prime dividend shares. The typical ahead yield for UK blue-chip shares sits at 3.6%. However with some cautious analysis, I feel traders can do significantly better than this.
Proper now, WPP (LSE:WPP) and Authorized & Common Group (LSE:LGEN) each provide a bigger dividend yield than the broader index. If traders select to purchase these Footsie shares as a substitute of an index tracker fund, the distinction it might make to their passive earnings could possibly be appreciable.
An equal £20,000 funding unfold throughout these shares might present an earnings stream of £1,460 over the subsequent 12 months. That is greater than double the £720 {that a} tracker just like the iShares Core FTSE 100 UCITS ETF would possibly present over the identical timeframe.
I additionally really feel that these three blue-chip shares will present a rising dividend over time. Right here’s why I feel they’re value critical consideration in the present day.
WPP: dividend yield: 5.2%
WPP has suffered extra lately as larger rates of interest have whacked promoting budgets. Buying and selling has been particularly arduous in North America and China, that means Metropolis analysts count on a slight discount on this yr’s annual dividend.
However earnings traders ought to keep in mind that WPP’s near-term yield nonetheless beats the market common. And the advert company appears to be like in good condition to pay the dividend analysts expect, too.
Predicted earnings for 2024 cowl the anticipated dividend 2.3 instances. That is nicely forward of the broadly regarded security benchmark of two instances.
There’s excellent news for WPP traders past this yr too. Metropolis analysts count on dividends to begin rising once more from 2025 because the promoting sector rebounds. So the yield rises to five.4% for subsequent yr and 5.6% for 2026.
WPP is a share that would ship terrific returns over the lengthy haul. I count on its rising publicity to fast-growing rising markets to repay handsomely. I additionally like its deal with the booming digital promoting sector.
Authorized & Common Group: dividend yield: 9.4%
Sadly, Authorized & Common doesn’t have the identical stage of dividend cowl as WPP. For 2024 this sits at 1.1 instances, that means shareholder payouts could possibly be in danger if earnings miss the mark.
I’m not sure, however the monetary companies large might nonetheless be in good condition to continue to grow dividends, as Metropolis analysts count on. Even when earnings disappoint, it has a cash-rich stability sheet to assist it meet dealer expectations. Its Solvency II capital ratio stands at a formidable 224% proper now.
Authorized & Common actually has a long-standing dedication to elevating dividends, as proven within the graphic above. And in current days the agency affirmed its intention to proceed elevating dividends (at a fee of 5% this yr, and a pair of% between 2025 and 2027).
This implies the dividend yield on its shares rises to 9.8% for subsequent yr, and bursts into double-digit territory at 10.2% for 2026.
I feel Authorized & Common’s spectacular report of dividend progress will proceed for a few years to return. Rising demand for retirement and wealth merchandise ought to preserve driving earnings steadily larger.
