When I first dabbled in investing 20 years ago, I didn’t pay much attention to FTSE 100 dividend shares. In fact, I didn’t really know how dividends worked or even whether I got to keep them.
Share price growth was all I cared about. So I ended up with a rag-tag bunch of once-whizzy stocks that had caught my eye for whatever reason. I’ve learned a lot since then.
I still buy growth stocks. In 2024, I’ve enjoyed stellar returns from private equity specialist 3i Group, FTSE 250 insurer Just Group, and engineer Costain Group. Over 12 months, their shares are up a stunning 65.72%, 93.07%, and 60.94%, respectively.
I don’t just buy growth stocks
Inevitably, I’ve had my share of losers too. Attempts to catch falling knives Aston Martin, Ocado Group, and Burberry Group all proved foolhardy.
Happily, I’m still ahead overall, and even better, holding a spread of FTSE 100 dividend stocks has helped to keep things ticking over.
Today, the FTSE 100 financials sector is a rich source of dividends. I hold Legal & General Group, M&G, and Phoenix Group Holdings.
Their trailing yields have to be seen to be believed at 8.51%, 9.74%, and 10.05%, respectively. They smash the return from any savings account.
Sadly, their shares have floundered over the last 12 months. L&G is up a modest 5%, M&G has slipped 2.46%, and Phoenix has climbed 10.7%. This has been a tough year for the financial sector, due to bumpy stock markets and sticky interest rates. Yet I’ve still got my dividends (and yes, I do get to keep them).
Investors can still get up to 5% a year on cash or bonds without putting their capital at risk. Once interest rates fall, savings rates and bond yield will follow but dividends won’t. With luck they’ll rise, as companies increase profits and share the spoils with investors. As with investing, nothing is guaranteed.
My Taylor Wimpey shares have taken a beating
I’m keeping a close eye on one portfolio holding, house builder Taylor Wimpey (LSE: TW). Just a couple of months ago, I was sitting on a total 12-month return of around 50%, including reinvested dividends. Not anymore.
The Taylor Wimpey share price has slumped 19.75% in the last three months, as interest rate cut hopes fade and mortgage rates climb. In a further blow, next April’s national insurance and minimum wage hikes will jack up hiring costs and squeeze the group’s margins. Over one year, the stock is down 3.61%.
Yet I think the Taylor Wimpey sell-off has been overdone. This morning we learned that house prices climbed for the fifth consecutive month in November to a record £298,083, according to Halifax. They’re up 4.8% over the year.
If interest rates fall next year, Taylor Wimpey shares could stage a recovery. Either way, I’m still getting my dividends. The trailing yield is now a bumper 7.44%. It looks reliable, given the company’s solid balance sheet.
Most shares go through good times and bad times. The attraction of dividend shares is that with luck, the income should roll in throughout. That’s why I’m basing my retirement around FTSE 100 dividend heroes like Taylor Wimpey. Plus some growth stocks, of course.
