1 FTSE 100 and 1 FTSE 250 dividend stock to buy for 2022

As Manika Premsingh plans investments for 2022, the opportunity to earn from dividend stocks looks particularly rich. Here are two stocks she could buy now. 

| More on:

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.

Businessman touching on number 2022 for preparation

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

To grow my passive income in 2022, I have to channel my investments into dividend stocks. The good news is that both the FTSE 100 and FTSE 250 indexes offer me choices with average dividend yields that are well above average. Here I look at two such stocks. 

Advantage insurers

The two stocks have more in common than just paying good dividends. They are both insurers too. According to data provider statista, the global insurance market will grow by more than 44% between 2020 and 2025. This is favourable to the companies in the sector, which can ride the growth wave now.

Now that economic recovery is underway, I reckon that non-life insurers could benefit in particular. As incomes rise, people are more likely to get insurance. And they are also more likely to make auto and property purchases, both of which are big non-life insurance categories. Life insurance in countries like the UK is anyway likely to grow on account of an ageing population. In the UK, the group aged 65 and over has grown by 23% in the last decade or so. This compares to an only 7% increase in the country’s population as a whole. 

Legal & General: FTSE 100 stock with a 6% dividend yield

Keeping this in mind, the one FTSE 100 stock I like is Legal & General (LSE: LGEN), the life insurer and investment manager. There is much to like about the stock. First, it has a dividend yield of 6%. With inflation at 4% right now, and expected to average at this level in 2022 as well, I like a stock that can give me positive real returns. Moreover, this high dividend yield is not a flash in the pan. The stock has yielded on average 6.1% for the last five years. 

Its performance has fluctuated, but I like that it has managed to clock net profits year after year. This is important considering that I would like to buy the stock with dividends in mind. If a company is unable to maintain its profits, it is unlikely to keep on paying dividends.

On the downside, its share price has not really gone anywhere in the past year, which is underwhelming. However, considering that it is still trading below its pre-pandemic highs, I think some upside is possible here. I would buy it for dividends. 

Direct Line Insurance: FTSE 250 high dividend stock to buy on dip

The FTSE 250 stock I like is Direct Line Insurance. It has a pretty good dividend yield of 8.3% right now, better than that for Legal & General. And over the last five years, it too has maintained a strong trend, with an average yield of 5.4%.

The general insurer’s share price has taken a hit in recent years owing to its weak performance, but I reckon that could change going by the improvements in its latest numbers and as the UK’s economic recovery gathers steam. I have bought the stock already. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of Direct Line Insurance. 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.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »