The FTSE 100 is a veritable treasure trove of high-yield passive income stocks. It’s packed with top-tier companies eager to shower their shareholders with dividends.
But picking the right dividend stocks takes a bit of digging. I need to avoid value traps and choose shares in companies with solid financials and a promising future. A high yield alone doesn’t guarantee long-term returns.
I’ve been combing through the index, searching for hidden gems. While it’s been tough to narrow it down, I’ve identified a couple of standout candidates. If only my wallet were as deep as my investment appetite, I’d snap them up in a heartbeat.
Aviva
Let’s kick things off with Aviva (LSE: AV.). This insurance giant has had quite a roller-coaster ride in 2024. After taking a nosedive following the acquisition of AIG Life in April, it staged a remarkable comeback, gaining over 11% year to date.
Still, it faces challenges. Past economic downturns have slashed the share price in half so it’s fair to say that could happen again. Any kind of natural disaster is a significant risk for an insurance firm.
What really caught my eye about Aviva is its hefty 7% yield. That’s almost double the average Footsie payout and the fifth-highest on the index. There have been instances where dividends were reduced but payments have been consistent for years. They’ve grown at an average of 8.4% for the past 10 years.
Analysts are predicting a whopping 8% yield from Aviva next year — barring any unexpected cuts. And to top it off, the stock is trading at a bargain-basement price-to-earnings (P/E) ratio of 10. That looks like great value that I’d love to get in on if I had the cash.
Imperial Brands
Imperial Brands (LSE: IMB) is another stock I like the look of right now. The tobacco giant made decent gains earlier this month after posting a positive trading update. Highlights included an expected 20%-30% growth in revenue and notable advances in its less harmful next-gen products. These include blu vapes, iSenzia heat sticks, and flavoured oral pouches.
However, if Imperial’s less harmful products don’t take off, it risks falling into obscurity. Smoking is a significant health concern that regulators worldwide are battling. The new Labour government is already eyeing new restrictions on outdoor smoking and has even floated the idea of banning tobacco sales to anyone born after 2009.
Meanwhile, the global smoking scene has been shrinking. In 2000, nearly a third of adults were puffing away. Now, the World Health Organization estimates that’s down to 22%, and it’s expected to drop further to 18% by 2030.
Prohibition seldom works but less harmful products might. To sweeten the deal for its shareholders, Imperial has announced a 4.5% dividend hike to just over 153p per share. But that’s not all. It’s also planning to return a whopping £2.75bn to shareholders this year. That includes a £1.25bn share buyback and a series of four quarterly dividend payments amounting to £1.5bn.
That sounds good to me! I just hope I’ll have some free capital to buy the shares soon before the share price takes off.
