These 3 FTSE 100 shares pay 9.6%+ a year in cash!
Picture supply: Domino’s Pizza Group plc
I’ve been investing since 1986-87, so I’ve made my cash work more durable for 37+ years. Over this era, I’ve grown to like my dividends — the money payouts given to shareholders by firms. And my favorite place to seek out these rivers of money is within the FTSE 100.
Scrumptious dividends
Investing nice John C ‘Jack’ Bogle as soon as remarked: “The market is commonly silly, however you may’t deal with that. Deal with the underlying worth of dividends and earnings.”
In its easiest sense, that’s what my investing technique does: enhance my dividends (and capital beneficial properties) over time. And once I come to retire, I hope to have sufficient diversified, passive earnings to maintain me snug in my senior years.
In fact, future dividends will not be assured, to allow them to be reduce or cancelled with little discover. Additionally, most London-listed firms don’t pay out dividends. Nonetheless, as I mentioned earlier, the blue-chip Footsie index is a superb supply of dividends.
Three dividend dynamos
At present, the FTSE 100 affords a dividend yield of round 4% a 12 months. However these three Footsie companies simply beat this yield by extensive margins (my desk is sorted from highest to lowest dividend yield):
Firm | Enterprise | Market worth | Share worth | Dividend yield | One-year change* | 5-year change* |
Vodafone Group | Telecoms | £18.1bn | 66.73p | 11.6% | -27.8% | -53.7% |
Phoenix Group Holdings | Asset administration | £4.9bn | 485p | 10.7% | -13.4% | -26.7% |
British American Tobacco | Tobacco | £53.9bn | 2,417p | 9.6% | -18.5% | -21.7% |
These firms vary in measurement from nearly £5bn to just about £54bn and compete in very totally different enterprise sectors. However what they do have in widespread is all three shares supply market-thrashing money yields.
These vary from nearly 10% a 12 months from the UK’s largest tobacco agency to nearly 12% a 12 months from a widely known telecoms group. Throughout all three shares, the typical yearly dividend yield is 10.6% — versus that 4% from the broader FTSE 100.
Downsides to dividend investing
Time for me to level out out three pitfalls with investing in high-yielding shares.
First, the above dividend yields are trailing figures, so that they mirror the previous and never the longer term. Certainly, Vodafone has simply introduced that it’s set to halve its dividend subsequent 12 months to €0.045 from €0.09 per share. Thus, its ahead yield dives to five.3% a 12 months for 2025.
Second, firms that pay out massive proportions of their income in dividends generally fail to speculate sufficient in future progress. My desk reveals that each one three shares have seen their share costs tumble over one and 5 years — an indication of attainable stagnation?
Third, all three firms carry substantial quantities of web debt, placing stress on their steadiness sheets. For instance, Vodafone Group has web debt of €33.4bn (£28.5bn) to service.
Regardless of these issues, I proceed to be a fan of dividend investing. Certainly, my spouse and I personal two of the three shares proven above (however not the tobacco inventory, which my spouse refuses to personal).
In abstract, I hope to take pleasure in rising payouts from these and different dividend dynamos. That mentioned, I received’t hesitate to ditch even the highest-yielding shares when their outlook turns grim!