SSE PLC, Persimmon plc, J Sainsbury plc, Tesco PLC And HSBC Holdings plc Support The FTSE 100’s Biggest Dividends

At the core of every portfolio lies a collection of defensive, sturdy stocks which pay a hefty dividend yield. So, if you’re an income seeker look for opportunities, here the five companies with the biggest dividend yields in the FTSE 100. 

Defensive utility ng

At the top of the list is SSE (LSE: SSE). At present SSE’s shares support a dividend yield of 6%, a yield you would be hard pressed to find elsewhere.

What’s more, the company’s payout is set to rise in line with inflation over the next two years. This puts the company on course to offer a dividend yield of 6.1% for 2015 and 6.3% for 2016. These payouts are set to be covered by around one-and-a-half times by earnings per share. 

housebuildingHome builder 

Home builder Persimmon (LSE: PSN) is on a mission to return cash to investors. The company announced a strategic plan during February 2012, which included a commitment to return £1.9 billion, or £6.20 per share of surplus capital to shareholders over nine-and-a-half years.

However, management has noted that due to the strength of the housing market, this plan should be accelerated. Based on this, City analysts are currently predicting that Persimmon will offer a dividend payout of 76p per share this year and then 97p per share next year. These payouts translate into a dividend yield of 5.9% and 7.6% respectively. 

Supermarket giant Tesco

It’s hard to ignore Struggling supermarket giant Tesco’s (LSE: TSCO) impressive dividend yield.  At present, Tesco offers a dividend yield of around 5.7%. This payout is covered more than twice by earnings per share.

Unfortunately, City analysts are forecasting that Tesco will cut its dividend payout by around 5% next year, which means that the company’s dividend yield will fall to 5.2% — still an attractive return in this low interest rate environment. 

Sainsbury'sIt pays to wait 

The City also expects that Tesco’s smaller peer, J Sainsbury (LSE: SBRY) will cut its dividend payout next year. At present, Sainsbury’s offers a dividend yield of 5.5%, a payout that is covered nearly twice by earnings per share. Nevertheless, even after the payout cut, City analysts expect that Sainsbury’s shares will support a 5.2% dividend yield.   However, forecasts are currently predicting that Sainsbury’s earnings will remain constant over the next two years. Still, with a yield of 5.2% on the cards for next year, it pays to wait.  

City support HSBC

And lastly we have HSBC (LSE: HSBA), a dividend giant that recently won the support of City superstar Neil Woodford and it’s easy to see why. HSBC’s shares currently support an attractive dividend yield of 4.6%, covered nearly twice by earnings per share.

Current City forecasts expect the bank’s dividend yield to hit 5% next year followed by 5.4% the year after.  

Additionally, HSBC’s shares currently appear undervalued as the bank trades at a forward P/E of 12.8, which is only slightly above the ratio the bank traded at during the midst of the financial crisis. Actually, this valuation is more than 50% lower than its peers; the wider banking sector trades at an average P/E of around 26.

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Rupert Hargreaves owns shares of Tesco. The Motley Fool owns shares of Tesco.