After last year’s dividend cuts and suspensions, I was surprised to see just how many top British dividend income stocks are making generous shareholder payouts today. Last week, I suggested nine worth pursuing. Here are two more of my FTSE 100 income favourites.
Insurer and asset manager Legal & General Group (LSE: LGEN) is possibly my number one British dividend income stock. To its credit, L&G continued to reward loyal shareholders throughout the pandemic, even when rival Aviva bowed to pressure and cut its dividend.
Today, L&G offers a thumping forward yield of 6.5%. With the average savings account paying 0.06%, that is a mighty return. Naturally, as with all dividends, there are no guarantees. However, the payout is covered 1.7 times by forecast earnings, which boosts my confidence.
I’d buy these two FTSE 100 stocks
Legal & General didn’t survive the pandemic completely unscathed. In March, it reported a 3% drop in annual operating profits to £2.21bn, while it has set aside an extra £110m to cover claims caused by mutant Covid strains. Yet its fund management arm has done well, with assets under management increasing 6.9% to £1.3bn. Better still, the underlying business remains solid, with capital levels climbing to a meaty 192%. This could free up funds to invest in faster growth opportunities.
As well as being a top British dividend income stock, the Legal & General share price has delivered growth as well. It is up 36% over the last year, although five-year growth is actually lower at 20%. For me, L&G is mostly about income, and on that front, it delivers.
I am sticking with the insurance industry for my next pick, Phoenix Group Holdings (LSE: PHNX). This also merits the title of top British dividend income stock for maintaining payouts through last year’s woes. Today it yields 6.6%, although cover is slightly thinner at 1.3 times earnings.
I’d buy this top British dividend income stock, too
Phoenix is a different creature to L&G. Its strategy is to buy up old life insurance and pension funds that are closed to new business, and run them on behalf of members. The more it buys, the greater the economies of scale. It now services 14m policyholders.
The Phoenix share price is never going to shoot the lights out. The income is the attraction here, as the share price has climbed just 15% measured over both one and five years. Management knows that, and kept investors onside by taking advantage of record £1.7bn cash flows to hike its annual payout by 3%.
The challenge is that Phoenix must keep buying up legacy life pension and life funds in order to keep growing and funding those dividends. So I am pleased to see that it also has an ‘open’ business offering pension and investment products to new customers, under the Standard Life brand. In 2016, it acquired SunLife from Axa. This diversification should help it remain a top British dividend income stock over the longer term.
I'd also take a look at this.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.