I’m looking for ways to boost my passive income with FTSE 100 dividend shares. Here are three whose forward yields sail above the 3.8% index average.
British American Tobacco
UK tobacco stocks such as British American Tobacco (LSE:BATS) were traditionally seen as lifeboats during tough economic periods. The addictive nature of their products allowed them to grow revenues even when consumers felt the pinch.
But changing attitudes to smoking mean these shares are plummeting in value. Strict legislation concerning the sale, marketing and use of cigarettes has hastened the decline too. BAT expects global demand to fall 2% in 2023.
The company’s success with new technologies like e-cigs provides a ray of hope. It noted this month that its next-gen products continue to enjoy “strong volume, revenue and market share growth.” However, the pressure from lawmakers to curb use of these technologies is also growing strongly.
Australia, for instance, plans to ban single-use vapes and reduce the nicotine content of these products, it announced this month. For all these reasons I’m happy to pass on the shares. Even their FTSE-smashing 9.2% forward dividend yields aren’t enough to tempt me.
Britain’s housebuilders face near-term earnings pressure as interest rates rise and buyer appetite wanes. Yet predictions of a lasting supply shortage — caused in part by problems surrounding planning permission — suggest such businesses should grow profits strongly once current troubles subside.
The Home Builders Federation says regulations concerning nutrient-related pollution alone will reduce home completions by 41,000 each year. A string of other planning laws also look set to hamper build rates looking ahead.
This is why I’m clinging on to my Persimmon (LSE:PSN) shares. In fact I’m considering buying more given its 6.3% forward dividend yield.
As long as these restrictions persist, the likes of Persimmon should continue commanding premium prices for their product. Solid pricing in 2022 meant the firm’s underlying operating margin remained high at 27.2% in 2022. It can look forward to more of the same as the decade rolls on.
High interest rates have helped banks like Barclays (LSE:BARC) grow profits despite the tough economic backdrop. Pre-tax profits here rose 16% to £2.6bn in the first quarter thanks to Bank of England action.
With inflation running hot the central bank looks poised to continue tightening policy too. Indeed, the market now expects the BoE to raise rates to 5.5% by the end of the year after the latest consumer price numbers. This is up from 4.5% at present.
Yet I’m not tempted to invest in Barclays shares right now. As interest rates in the UK and the US move higher, the threat of twin recessions in the bank’s territories — and with them a steady rise in credit impairments — appears on the cards. The FTSE firm chalked up £524m worth of bad loans in the first quarter alone.
I’m also wary of rising competition from digital banks and what this also means for loan growth. I’m happy to look past Barclays’ 5.5% dividend yield and buy other dividend stocks.