FTSE 100 dividend income shares are my first port of call when shopping for shares in a stock market dip. That’s because when share prices fall, it gives me an opportunity to lock in a higher dividend yield.
The UK’s blue-chip index has slipped in recent days, and that’s driven up the yields on a number of dividend stocks. Here are two for which that’s the case right now.
Aviva shares now yield more
For me, Aviva (LSE: AV) is ‘the one that got away’. I shunned the FTSE 100 insurer in favour of rival Legal & General Group, but backed the wrong horse.
The Aviva share price is up 25% in the last year, and almost 140% over five years, plus investors will have got some healthy dividends on top.
CEO Amanda Blanc has driven through the long-awaited turnaround, streamlining the business and sharpening its focus.
On 14 August, Aviva shares hit their highest level since 2007 after it posted a 22% rise in half-year operating profit to £1.07bn. Investors are also optimistic about its £3.7bn Direct Line acquisition, which will cement its share of the general insurance market.
Yet I’ve held back, wary of a share price that now trades on a price-to-earnings ratio of 27, which means the slightest earnings disappointment may be punished. Insurance is a mature and competitive market, and rivals will continue to snap at its heels.
However, the Aviva price has now dropped 7% in a week, which offers investors a lower entry point. That’s driven the trailing dividend yield back up to a juicy 5.75%. Of course, a stock market sell-off this autumn could drive the share price lower, but I don’t know if we’ll get one. I still think it’s worth considering today.
Schroders stock scares me
There’s more to life than a high yield. Otherwise I would have bought privately run FTSE 100 investment manager Schroders yonks ago. I’m glad I didn’t though. Its shares are down 25% over five years — and 10 years too.
They’ve edged up a modest 6% in the last year, helped by an 8% rise in first-half gross inflows to £68.2bn. But they’ve been knocked back in the last week, falling 7%.
With a P/E ratio of 13.7, the shares look decent value. On the other hand, they’ve looked cheap for years.
The trailing dividend yield of 5.97% tempts. The board has a decent record of increasing dividends, which have compounded at an average rate of 9.37% over the last 15 years. It hasn’t cut shareholder payments this millennium, although it has frozen them on nine occasions – including in both 2023 and 2024.
Schroders is battling to reshape itself. It’s blue-blood credentials just don’t have the same traction in a world of passive index tracking and active DIY trading.
Dividends but where’s the growth?
Management has been slashing operating expenses and selling off “sub-scale businesses”, as it looks to add discipline and focus, but it could take time for its transformation programme to bear fruit.
The Schroders share price didn’t make hay while the sun was shining on the stock market, so investors should be cautious as autumn storm clouds appear to be gathering.
Aviva has sorted itself out, and that’s the one to consider. But that’s only my opinion. Investors should take their own view.
