These FTSE 100 shares offer dividend yields far above the index’s sub-4% average. I’ll be looking to add them to my UK shares portfolio when I next have spare cash to invest.
Demand for financial services can sink when consumers have less to spend. So Aviva (LSE:AV.) faces huge uncertainty as high inflation drags on and the UK economy cools.
Yet City analysts still expect the company to deliver massive dividends over the short term. The full-year payout is tipped to grow to 34.36p per share in 2024, resulting in a large 8.9% dividend yield.
These bright forecasts are due to the life insurance giant’s exceptional ability to generate cash. Aviva’s Solvency II own funds generation (OFG) leapt 26% in the six months to June, to £648m. Aviva now expects to beat its OFG target of £1.5bn per year by 2024.
A flurry of overseas asset sales — a drive designed to refocus its attention and resources on its core UK, Irish and Scandinavian markets — has put the company on a sound financial footing. Its Solvency II shareholder cover ratio stood above 200% at the end of the first half.
The company has just announced more divestments to give its balance sheet another big cash injection too. On Wednesday, it announced the sale of its 25.9% stake in Singapore Life Holdings and two debt instruments for a cool £800m.
Aviva raised the interim dividend 8% this year, and also completed a £300m share buyback in the first half. I expect it continue returning boatloads of cash to its investors over the short term.
I’m also expecting National Grid (LSE:NG.) shares to deliver FTSE 100-beating dividends in 2024. In fact, I think it’s an excellent lifeboat for income investors as the economy splutters.
Its role as guardian of the UK’s transmission network gives it better earnings stability than most other UK shares. Having an efficient and working power grid is one of modern society’s ‘non-negotiables’. So demand for the FTSE 100 firm’s services remains constant even during economic downturns.
What’s more, National Grid operates a market monopoly, protecting profits from competitive threats. The dependable earnings and cash flows the utilities business enjoys gives it the confidence and the means to increase dividends steadily over the long term.
Analysts certainly expect shareholder payouts here to keep climbing over the next 12-18 months. Full-year dividends of 57.75p and 59.22p per share are anticipated for the financial years to March 2024 and 2025 respectively. This creates bumper yields of 5.8% and 6%.
Things aren’t perfect over at National Grid however. One concern I have is the size of the company’s financial liabilities. Net debt — which stood a £41bn as of March — is tipped to rise another £4.5bn this year as the firm invests further in green energy infrastructure.
But City brokers don’t think this will impact dividends in the nearer term, at least. And neither do I. Like Aviva, I think National Grid shares are a great way to make passive income in these uncertain times.