The ten highest dividend yields in the FTSE 100

Rupert Hargreaves looks at the FTSE 100’s top yielding stocks for income investors to consider.

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.  

At the end of May, the FTSE 100 dividend yield stood at 3.4%.  

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. 

Company

Dividend per share for 2022*

Dividend per share for 2023*

Dividend yield (%)

Dividend growth (%)*

Forward (p/e)*

Rio Tinto

$8.84

$6.20

13.5

-30

5.3

Persimmon

239p

241p

11.3

0.1

8.2

M&G

19.4p

20.2p

9.1

3.4

9.7

Royal Mail

28.7p

22.6p

8.5

-21.2

5.7

Imperial Brands

142p

147p

8.3

3.5

6.9

Phoenix Group

49.9p

51p

8.1

2.1

8.1

Abrdn

14.6p

14.6p

7.7

7.7

15.2

Legal & General

19.3p

20.2p

7.8

4.7

7.5

Barratt Developments

37.6p

43.2p

7.8

15

6

Aviva

31p

32.5p

8.2

5

7.1

*Estimated

The top blue-chip income stocks – and the two I would buy now 

Homebuilder Persimmon (LSE: PSN) currently offers the largest dividend yield in the FTSE 100 of 13.3%. Two other homebuilders, Barratt Developments (LSE: BDEV) and Taylor Wimpey (LSE: TW), also feature in the top ten with a distribution yield of 9.8% and 9.4% respectively.  

Traders have been betting against home builders this year as the outlook for the property market has started to deteriorate. However, according to company trading updates, strong demand for new properties is more than offsetting higher construction and mortgage costs. 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, and Glencore (LSE: GLEN) is close behind. Surging commodity prices have left both 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. M&G (LSE: MNG) and Abrdn (LSE: ABDN) yield 10.1% and 8.9% 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 Legal & General (LSE: LGEN) 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.  

SEE ALSO:

The ten highest dividend yields in the FTSE 250
The ten investment trusts with the highest dividend yields

Britain’s ten most-hated shares
Britain's most-bought shares
Director dealings: what company insiders are buying and selling

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