Now’s a great time to go shopping for FTSE 100 stocks, in my opinion. Many top-quality shares carry dividend yields that could help supercharge my passive income.
Take the two stocks below. As we can see, their yields for the next two years sprint past the 3.7% average for Footsie shares.
| FTSE 100 stock | 2024 dividend yield | 2025 dividend yield |
|---|---|---|
| Legal & General Group (LSE:LGEN) | 8.8% | 9.3% |
| Taylor Wimpey (LSE:TW.) | 6.7% | 6.9% |
But this is not all. Legal & General’s recent share price weakness also means it looks dirt cheap from an earnings perspective.
It trades on a price-to-earnings growth (PEG) ratio of 0.8 (a reminder that any reading below 1 indicates that a share is undervalued).
A £15,000 lump sum spread across these two Footsie stocks could make me £1,215 in passive income next year. Here’s why I’m thinking of buying them for my portfolio today.
A dividend hero
Its diverse and reliable income streams mean Legal & General has raised annual dividends for 14 of the past 15 years. The premiums it receives on its insurance products, the fees it charges at its investment arm, and the sale of annuities all allow it to pay a growing dividend almost every year.
I certainly can’t see this proud record coming to an end. And especially following its recent programme to boost the amount of cash on its books. Its Solvency II capital ratio stood at a mighty 224% as of December.
If rumours are correct, Legal & General might be taking steps to boost its balance sheet even further. Sky News has reported it has engaged banking group Rothschild to sell its Cala Homes unit in a potential £750m deal.
Profit growth may disappoint in the near term if the economic climate remains tough. But over the long haul I expect the bottom line to swell, as demographic changes drive demand for its retirement and other products.
On the rebound
I already own Legal & General shares. And I also have a stake in housebuilding giant Taylor Wimpey.
As conditions in the UK housing market brighten, I’m considering adding to my position. The builder’s statement in February that it is witnessing “encouraging signs of improvement” — with a subsequent rise in sales and drop in cancellations — adds to the sense that the sector’s turning the corner.
News that house prices have risen 1.5% in March adds further evidence to signs of encouraging momentum. This was the biggest jump for 10 months, Rightmove said, and above the historical March average of 1%.
Demand for new-build homes could splutter again if mortgage rates turn again. But with Bank of England cuts likely later on in 2024, conditions could reman favourable for homebuyers and, by extension, the likes of Taylor Wimpey.
