The ten highest dividend yields in the FTSE 100

The FTSE 100 is a market index made up of the 100 largest companies by market capitalisation on the London Stock Exchange, and it is usually used as a benchmark to judge the performance of the UK equity market.  

The index is also usually a first port of call for income investors.  

The FTSE 100’s strong dividend credentials  

According to AJBell’s Q1 Dividend Dashboard, 2022 could be the second-best year ever for total FTSE 100 cash returns. AJ Bell is projecting total dividend payouts of £81.2bn in 2022 and a further £32.7bn in share buybacks, although these numbers could change as the year progresses.  

As of 20th July the FTSE 100 dividend yield stands at 3.7%.  

Overall, 97 FTSE 100 firms are expected to pay out in 2022, up from 85 in 2020 when the pandemic forced companies to rethink their cash return plans. The best year on record for dividends in cash terms was 2018 when payments peaked at £85.2bn.  

Analysts believe blue-chip profits will hit a record of £169.7bn, lifted by strong earnings growth in the mining and healthcare sectors. These numbers suggest the index’s constituents will have headroom to return even more cash to investors next year.  

Here’s a list of the ten highest-yielding stocks in the FTSE 100 and our favourite picks for income in the blue-chip index. (You can see the highest yields in the FTSE 250 here.)

*Refinitiv broker estimates

Persimmon (LSE: PSN) continues to support the highest dividend yield in the FTSE 100. Standing at 13.5%, the yield is three-and-a-half times the index average. Barratt Developments (LSE: BDEV), another UK homebuilder, also features in the top ten with a distribution yield of 8%. 

While traders have been betting against builders this year, these companies continue to report strong trading. There seems to be ever-increasing demand for new homes in the UK, and these groups are capitalising on the trend. Strong house price growth is also helping builders deal with rising input prices.

That’s why these businesses are standing by their dividend projections for the years ahead. They’re also sitting on large cash piles, which will act as a cushion against economic uncertainty.  

The commodity sector is also well represented on this list. Rio Tinto (LSE: RIO) currently offers the second-largest yield in the blue-chip index with Glencore (LSE: GLEN) and Anglo American (LSE: AAL) close behind. Suring commodity prices have left all three of these businesses awash with cash, and they’re returning much of this windfall to investors. Glencore’s trading division has been particularly active this year, capitalising on “pricing differentials” in the energy markets to earn record profits.  

Alongside the builders and commodity stocks, financial services also offer some of the biggest shareholder distributions in the FTSE 100. These companies might all have a place in the same sector, but they have differing outlooks.

M&G (LSE: MNG) and Abrdn (LSE: ABDN) yield 9.5% and 9.4% respectively. These high yields seem to reflect the market’s view that neither company can support the payout at current levels and a cut could be on the horizon. I’m inclined to agree. These asset managers are under pressure from cheaper competitors and maintaining market share is becoming increasingly costly. They might have to make some tough decisions going forward.  

Pensions group Phoenix (LSE: PHNX) and financial services giant Aviva (LSE: AV) could be safer income alternatives. Both focus on managing pensions and long-term savings for clients, which gives them a lot of viability over future cash flows. As such, they can set dividend payouts accordingly. These stocks might not be the cheapest option on the list, but for dividend growth and sustainability, they look attractive.  

Admiral (LSE: ADM) is a new entrant to the list of the top-yielding FTSE 100 stocks. Shares in this insurance giant have plunged in value over the past week following profit warnings from not just one but two of its peers. 

Fellow car insurer Sabre (LSE: SBRE) warned on profits first, noting that inflation was pushing the cost of repairs above its forecasts. That prompted the business to warn investors that it was having to increase loss reserves and reconsider its dividend. This warning sparked panic among investors in the sector. Shares in Sabre divided 40% on the warning, and Admiral lost nearly a fifth of its value. 

Considering this warning, I’m not entirely convinced Admiral’s dividend is here to stay, but I could be wrong. Investors should approach this payout with caution.

Disclosure: Rupert Hargreaves owns shares in Admiral.

SEE ALSO:

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Five dividend stocks to beat inflation
The ten highest dividend yields in the FTSE 250
The ten highest dividend yields on Aim
The ten investment trusts with the highest dividend yields