Part of my investment routine at the beginning of each month is dedicating time to look for new dividend shares to buy. I’ve been searching the FTSE 100 and settled on a couple of income stocks that offer index-beating payouts.
The two companies are Abrdn (LSE:ABDN) and Aviva (LSE:AV.), which boast dividend yields of 6.4% and 6.6%, respectively.
Let’s explore the outlook for each in turn.
Abrdn
The Abrdn share price is up 16% over the past year. This Footsie company provides a range of investment services and derives the majority of its revenue from the UK.
First, it’s important to acknowledge the investment manager faced difficulties last year. The company’s 2022 performance was a little disappointing. Net operating revenue fell 4% to £1.5bn and underlying profit was down almost a fifth at £263m.
However, in my view, volatile market conditions are largely responsible for these figures and there are reasons to be optimistic about the firm’s prospects in 2023.
Last year, the business acquired Interactive Investor (ii). This improves Abrdn’s direct-to-consumer offering in UK savings and wealth. Indeed, ii’s growth looks promising.
| ii Performance Metrics | FY22 Results vs FY21 |
|---|---|
| Net operating revenue | £176m (+38%) |
| Adjusted operating profit | £94m (+109%) |
| Cost/income ratio | 47% (18ppts better) |
| Customer numbers | 402,000 (flat) |
In addition, I’m pleased the company maintained its annual dividend at 14.6p per share, which suggests Abrdn is keen to preserve its reputation as one of the top UK dividend shares to buy.
That being said, dividend cover isn’t as strong as I’d like, but I’m hopeful the stock could benefit from easier trading conditions if the macroeconomic picture begins to improve. Plus, it’s worth noting that adding value for shareholders via share buybacks remains a key priority.
Overall, if I had some spare cash, I’d buy Abrdn shares while the company continues to streamline its business and strengthen its customer base.
Aviva
In contrast to Abrdn, the Aviva share price has slumped 16% on a 12-month basis. The multiline insurer focuses on the British, Irish, and Canadian markets.
Aviva looks like another solid dividend share in my opinion. The company anticipates a 32.5p per share payout this year. What’s more, the business also expects to launch a new share buyback programme to accompany its full-year results next week.
Rapid growth in Aviva’s bulk annuity business is encouraging. So too is the firm’s position as one of the largest equity release providers in the UK. Both of these features mean the business is well placed to benefit from increased demand for retirement funding solutions. In this context, demographic changes from aging populations are a long-term tailwind for Aviva shares.
Investing in the insurance giant isn’t risk-free. Like most life insurers, Aviva has large liabilities on its balance sheet. When defined benefit pension schemes faced margin calls on liability driven investment (LDI) strategies after last year’s ‘mini’ budget, the group’s capital and liquidity was tested. Future turbulence in bond markets could deliver further shocks.
Nonetheless, Aviva’s a well capitalised business. It showed admirable resilience in the face of market turmoil. With diversified revenue streams and market-leading distributions on offer, this is another FTSE 100 dividend share I’d buy in March with some spare cash.
