2 FTSE 100 dividend yields above 7%! Should I buy?

These FTSE 100 businesses both offer dividend yields well above the index average of 3.7%. Does this make them good buys for my shares portfolio?

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FTSE 100 share Imperial Brands (LSE: IMB) has leapt in 2022 as income investors have sought the safety of tobacco stocks. Their addictive products provide profits stability even during tough times, meaning shares like this usually keep raising dividends.

City analysts also believe Imperial Brands will keep lifting dividend payouts, too. They anticipate a 142p per share reward in financial 2022. They’re predicting a higher 147p dividend payment next year, too.

As a consequence Imperial’s dividend yields sit at 7.6% and 7.9% respectively for these years.

New technologies

It’s quite possible Imperial Brands will be a better dividend payer than many FTSE 100 shares in the short-to-medium term. But the fight against Big Tobacco means that the long-term outlook for cigarette manufacturers is highly uncertain.

Their investment in new technologies like vaporisers and thermal heated products (THP) has soared over the past decade. Imperial Brands itself has spent a fortune developing goods like its blu vape brand and THP line Pulze.

It is hoped that they could be a white-hot growth industry as smokers switch away from traditional cigarettes on health grounds. But their growth potential has been questioned more recently amid a slew of negative health studies.

Fresh threats

Researchers at the Johns Hopkins Medicine for instance have found that e-cigarette usage has led to “increased odds of asthma and chronic obstructive pulmonary disease” among patients.

Meanwhile, the fight against tobacco stocks’ traditional products also continue to intensify.

On Wednesday, New Zealand became the first country to introduce legislation to ban the sales of cigarettes to people born after a certain date. It is possible the policy could extend to territories where rules like public smoking bans and advertising curbs are already in place.

A better FTSE 100 buy?

I believe Legal & General (LSE: LGEN) could prove to be a better dividend-paying stock in the years ahead.

While demand for Imperial Brands’ goods looks in increasing danger, key demographic changes mean that L&G can expect sales to rise strongly. Rapidly ageing populations mean the company is likely to see interest in its pensions and retirement products like annuities soar.

Legal & General might suffer some turbulence in the more immediate future from stock market volatility. The firm has around £1.4trn in assets under management and waves of investor withdrawals could be around the corner if the economic outlook deteriorates.

7.7% dividend yields

But as someone who invests with a long-term view I’d be happy to swallow this danger. I also like the fact L&G is expanding its trading operations in North America to boost its market opportunities.

But let’s get back to dividends now. City brokers think the FTSE 100 firm will pay a 19p per share dividend in 2022 and a 20p reward in 2023.

This means the dividend yield sits at a healthy 7.3% for this year and 7.7% for next. I’d buy L&G today for its huge yield and look to hold it for at least the next decade.

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 considered so you should consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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.

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