As an older investor (I was 55 earlier this week), my investing strategy is to buy into quality companies at reasonable prices. Also, as a value and dividend investor, I like being paid cash dividends as a reward for being a shareholder. Indeed, this dividend stream is my main source of passive income.
I love share dividends
Passive income is money I get without work or effort. What’s more, this income builds up 24/7, even while I sleep.
There are various forms of this income, including savings interest, bond coupons, rental income, pensions, and more. But by far my favourite is the cash dividends I receive by owning shares.
However, relying solely on dividends for my retirement would be risky. That’s because future payouts are not guaranteed, so they can be cut or cancelled at any time.
Also, not all London-listed companies pay dividends. Indeed, the vast majority of UK shares don’t. But most FTSE 100 firms pay them, typically quarterly or half-yearly.
Six shares for high dividend income
After trawling the FTSE 100, I found these eight high-yielding shares. Many of these companies are leaders in their respective fields, plus most are household names.
| Company | Aviva | Barclays | Legal & General | M&G | Rio Tinto | Vodafone |
| Share price | 407.2p | 138.22p | 231.39p | 199p | 5,325.7p | 93.96p |
| Market value | £11.4bn | £22bn | £13.8bn | £4.7bn | £88.6bn | £25.3bn |
| One-year return | -25.3% | -17.8% | -15.8% | -11.8% | -1.7% | -24.4% |
| Five-year return | -40.2% | -34.0% | -11.8% | -11.6% | +42.6% | -53.4% |
| Dividend yield | 7.6% | 5.3% | 8.3% | 9.9% | 7.6% | 8.2% |
| Dividend cover | * | 4.1 | 1.9 | * | 1.5 | 0.8 |
The smallest company in my table is asset manager M&G, which weighs in at under £5bn. At the other end of the scale, mega-miner Rio Tinto is a London super-heavyweight.
All six shares have lost ground over one year, with the worst-hit diving by around a quarter. Also, four out of the five are down over five years, with Rio Tinto the only winner over a half-decade.
Then again, as share prices fall, dividend yields rise — all else being equal, that is. And that’s why I love buying shares at a discount after steep price falls.
These six shares’ dividend yields range from 5.3% a year at Barclays to a whopping 9.9% at Rio Tinto. Across all six stocks, the average cash yield comes to 7.8% a year. To me, that’s a solid ongoing reward for taking on the risks of owning shares.
Which shares would I buy now?
I’d be happy to own all six shares for their market-beating cash payouts. Indeed, my wife has already bought five of these stocks for our family portfolio. The odd one out is M&G, which is firmly on my buy list.
As I already own stakes in five firms, I won’t buy more shares in these companies yet. Also, I won’t buy M&G now. I’d rather wait until the new tax year starts on 6 April. Even so, I’m convinced that these six shares will eventually prove to be winners for my passive income!
