Currently, there are so many FTSE 100 income shares offering delicious dividends to shareholders. Furthermore, total dividend income from Footsie stocks could be £78.7bn this year. Whoa.
I grab my share of this cash cascade by owning 15 FTSE 100 shares and five FTSE 250 stocks. Also, as an investor seeking more passive income, I plan to buy even more.
Big, beautiful income shares
Over the last 12 months, the Footsie is up under 1%. This figure excludes dividends, which boost this annual return to about 5%.
I believe that UK large-cap stocks are deeply undervalued, especially the mega-cap giants. For me, big is beautiful, so here are two income shares I own that pay out billions of pounds of cash every year.
Two dividend stocks I own
1. BP
My first ‘dividend dynamo’ is oil & gas supermajor BP (LSE: BP). With the oil price sliding for two months, BP’s share price has dropped from 558p on 18 October to 467.75p today.
This leaves this stock up 0.8% over one year, but down 8.8% over five years (excluding dividends). BP’s market value has dropped to £79.4bn, making it London’s fifth-largest listed company.
For me, BP shares look as cheap as chips today. They trade on a lowly multiple of 4.2 times earnings, delivering a whopping earnings of 24%. This means that its market-beating dividend yield of 4.8% a year is covered five times by earnings — a massive margin of safety.
Of course, the oil price is volatile, so sometimes goes up and down like a yo-yo. As a result, holding BP shares has been a rocky ride at times. In addition, fossil-fuel polluters face increasing public hostility in the transition to a low-carbon economy.
Despite these issues, my wife and I paid 484.1p a share for our family’s BP stake in August. To date, we have a modest paper loss of 3.4%. Nevertheless, I expect powerful dividend income from this stock for years to come.
2. Unilever
Unilever (LSE: ULVR) is an FMCG (fast-moving consumer goods) Goliath. Every day, roughly 2.5bn people – close to one in three of the world population – use Unilever products. Wow.
With origins dating back to 1871, the group has over 400 household brands in its cupboard — far too many to list. Yet its share price hit a 52-week low of 3,716.5p on 30 November, diving 17.1% from its 2023 high of 4,483.25p on 28 April.
In August, we bought into this FTSE 100 fallen angel at 4,122.2p a share. As I write, the stock trades at 3,806.5p, so we are down 7.7% to date.
Over 12 months, Unilever shares have lost 8.5% of their value, while they have declined by 11.9% over five years. This has dragged down its valuation to £95.1bn — #4 in the London market.
After these falls, this mega-cap stock trades on an earnings multiple of 13.7, producing a 7.3% earnings yield. Thus, the dividend yield of 3.9% a year is covered 1.9 times by earnings. For Unilever, these fundamentals look incredibly attractive to me.
Of course, with consumer spending being squeezed in this cost-of-living crisis, Unilever’s sales growth may continue to slow. It could even turn negative, hitting margins, cash flow, and earnings. Even so, we aim to keep our Unilever stake for many, many years!
