Which FTSE 100 companies pay the best dividends right now?

Edward Sheldon takes a look at the FTSE 100 companies with the highest dividend yields and discusses whether he would invest in them today.

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The FTSE 100 is home to many dividend stocks. Shell, Unilever, GSK, Legal & General, and Lloyds are just some examples of dividend-paying companies within the index.

A lot of investors want to know which FTSE 100 companies pay the best dividends. So let’s take a look.

The best dividends in the FTSE 100

To find out which have the highest dividend yields, I sorted all the stocks within the index by their ‘rolling one-year’ yield. This takes into account the dividends that are expected to be paid out over the next 12 months and therefore provides a standardised measure of yield (every company has a different date for the end of their financial year and different dividend payment dates).

I’ve listed the 10 highest-yielding stocks below. It’s worth pointing out however, that these figures are all based on analysts’ dividend estimates. And estimates can be off the mark at times. So there’s no guarantee these stocks will deliver on these yields over the next 12 months.

CompanyDividend yield (rolling 1-year)
Persimmon12.4%
Rio Tinto9.8%
M&G9.3%
Glencore9.1%
Aviva8.8%
Abrdn8.7%
Taylor Wimpey8.5%
Barratt Developments8.4%
Imperial Brands8.0%
Phoenix Group7.9%

Source: Refinitiv

Huge yields

Looking at the table, we can see that FTSE 100 housebuilders offer some big yields right now. Persimmon currently offers the highest at 12.4%. Other housebuilders in the top 10 include Taylor Wimpey and Barratt Developments.

Financials also dominate the table. Currently, M&G, Aviva, Abrdn, and Phoenix Group are all in the top 10. There are also two mining companies, Rio Tinto and Glencore, and a tobacco company, Imperial Brands.

A warning in relation to high yields

While the yields in the table all look highly attractive, it should be noted that very high yields (7%+) can sometimes be a signal the company may face challenges ahead, and that there’s a dividend cut on the way.

Often, when a company has very high yield, it’s because the ‘smart money’ (big institutional investors etc) has already dumped the stock, pushing its share price down, and its dividend yield up temporarily.

Persimmon’s share price, for example, has fallen around 35% over the last year. This suggests that some investors are concerned about the outlook.

So care is needed with these kinds of stocks. Sometimes, high yielders can be ‘dividend traps’, because the yields on offer are not sustainable.

If a company does cut its dividend, it can be ugly for shareholders. Not only do they face the prospect of lower income from their investment, but they can also face share prices losses too.

The FTSE 100 dividend stocks I’d buy

So, personally, I would not be tempted to buy any of these high-yielding stocks for my portfolio right now. To my mind, the risks (dividend cuts and share price losses) outweigh the potential rewards (high dividends).

I’d prefer to invest in a selection of FTSE 100 dividend stocks that offer yields in the 2-5% region. I’d go for rock-solid companies that have excellent long-term dividend track records and are highly unlikely to cut their dividends any time soon.

This approach may not get me super high yields. But it’s also not likely to result in dividend cuts and big capital losses.

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.

Edward Sheldon has positions in Legal & General Group and Unilever. The Motley Fool UK has recommended GlaxoSmithKline, Imperial Brands, Lloyds Banking Group, and Unilever. 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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