The top three dividend stocks on the FTSE 100 now have yields in excess of 9%.
In fact, their yields were over 10% not so long ago, but all three share prices have picked up in the past month. So should we buy now before it’s too late?
Let’s take a look at them, lowest dividend yield first.
Savings and investments
In third place we have M&G (LSE: MNG), with a forecast dividend yield of 9.6%. The share price has been a bit volatile, but overall fairly flat in the last few years.
Profits have been erratic. But they can be on a year-to-year basis in the savings and investment business, especially in times like this.
M&G has kept its dividends going, though, with forecasts showing a few more steady years ahead. The firm has been handing back spare capital too, via share buybacks, amounting to £500m in 2022.
Now, 2023 looks like a very different year. Inflation and high interest rates have drawn people away from saving and investing. And we might see pressure by the end of 2023.
But in its Q1 update, M&G said: “We remain committed to our disciplined capital management framework and policy of stable or increasing dividends per share“.
Life and pensions
Phoenix Group Holdings (LSE: PHNX) comes in second, with a yield slightly below 9.7%.
Phoenix acquires closed life and pension funds, and its exposure to the investing business has kept its shares down. We’re looking at a 19% dip over five years.
The 2023 financial squeeze has hurt, with the share price falling sharply in March… and then it slid some more.
The same risks apply here as for M&G. The stock valuation depends a lot on the assets it manages, and they’ve been under pressure. And that could continue.
But, with H1 results released on 18 September, Phoenix lifted its interim dividend by 5%, speaking of a “sustainable dividend that grows over time“.
It should be all about cash generation, and the board now expects to hit the top end of expectations for the full year.
Vodafone (LSE: VOD) has a dividend yield a bit above 9.7%, the biggest in the FTSE 100. Analysts expect it to keep growing too, and it could hit 10% by 2026.
But though it’s blipped up a bit lately, Vodafone stock is down 53% in the past five years. Why’s that?
Part of the problem is that Vodafone’s earnings have not been covering its dividends. If forecasts come good, we might just about see break-even cover by 2026.
But it’s a company with high capital expenditure, to keep up with the fast pace of telecoms. Vodafone carries big debt too.
Still, for those who just want the cash, this could be a good buy. At current rates, it might only take about 10 years for an investment to be fully repaid by dividends.
I won’t buy Vodafone, because I don’t like the company’s approach to cash management.
The other two, though, are on my want list, even with their short-term risks.