The Motley Fool

My 3 top FTSE 100 shares for extra dividend income!

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Hand holding pound notes
Image source: Getty Images.

On Tuesday, I wrote about my love of dividends: the regular cash payments paid by some companies to shareholders. Over the years, this passive income has really built up, contributing tens of thousands of pounds each year to my family portfolio. But most London-listed stocks don’t pay dividends. What’s more, just 10 FTSE 100 companies accounted for over half (54%) of all dividends in 2020, according to investment group A J Bell.

As a dividend-loving investor, I’m always seeking high-yielding shares to add to my family portfolio. For me, one good place to look for chunky dividends is in the FTSE 100, where I see plenty of hidden value. Here are three Footsie dividend dynamos that I’d consider buying for their generous passive income.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

FTSE 100 stock #1: BATS (7.6%)

British American Tobacco (LSE: BATS) is the world’s largest cigarette manufacturer. This makes BATS a stock for ethical and socially responsible investors to avoid. But BATS has been a FTSE 100 dividend darling for decades. The business — founded 119 years ago in 1902 — had global sales of £25.8bn in 2020. These huge revenues generate enormous cash flows, much of which is returned to shareholders as cash dividends. At Thursday’s closing price of 2,818.5p, BATS is valued at £64.6bn, making it a FTSE 100 super-heavyweight. At this level, BATS shares trade on a price-to-earnings ratio of 10.3 and an earnings yield of 9.7%. The dividend yield of nearly 7.6% a year is among the five highest yields in the Footsie. That’s why I regard this smoking stock as a top investment for income-seekers like me, although I don’t own BATS yet.

Income share #2: LGEN (6.4%)

Having worked in the insurance industry for 15 years, Legal & General Group (LSE: LGEN) is one British business I’ve grown to admire. As a household name founded in 1836, almost everyone in the UK knows of this leading provider of life assurance, savings, and investments. Today, L&G manages over a trillion pounds of wealth for more than 10m customers. In short, L&G is a class act in its sector — but it also faces intense competitive pressure from massive global rivals. On Thursday, L&G shares closed at 273.5p, valuing the group at £16.4bn — a FTSE 100 middleweight. Currently, this stock trades on a price-to-earnings ratio of 13.1 and an earnings yield of 7.6%. L&G’s dividend yield of 6.4% a year is among the top 10 in the Footsie. It’s pretty rare that I get such a high cash yield from such a solid business, which is why L&G is on my buy list for passive income.

High-yield stock #3: GSK (5.7%)

My third stock is pharmaceutical giant GlaxoSmithKline (LSE: GSK). This FTSE 100 share has jumped +17.3% from its 26 February low — good news for me as a GSK shareholder. I’ve held onto them for decades as the price has zigzagged between £10 and £20 since 2000. My loyalty comes simply because this global healthcare Goliath has paid an 80p-a-share dividend for the past five years. At Thursday’s closing price of 1,396.6p, this translates into a dividend yield above 5.7% a year. This £69.5bn FTSE 100 titan’s shares currently trade on a price-to-earnings ratio of 13.2 and an earnings yield of 7.6%. The next quarterly dividend of 19p is due to be paid on 8 July to shareholders as at 20 May. For now, I’ll keep holding this stock, although GSK plans to cut its dividend in 2021/22. However, if the coming cut is more than, say, 25%-30%, then I might finally sell and move on.

The Motley Fool UK's Top Income Stock...

We think that when a company’s CEO owns 12.1% of its stock, that’s usually a very good sign.

But with this opportunity it could get even better.

Still only 55 years old, he sees the chance for a new “Uber-style” technology.

And this is not a tiny tech startup full of empty promises.

This extraordinary company is already one of the largest in its industry.

Last year, revenues hit a whopping £1.132 billion.

The board recently announced a 10% dividend hike.

And it has been a superb Motley Fool income pick for 9 years running!

But even so, we believe there could still be huge upside ahead.

Clearly, this company’s founder and CEO agrees.

Learn how you can grab this ‘Top Income Stock’ Report now

Cliffdarcy owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.