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These FTSE 100 stocks all yield 6%+. Time to buy?

Image source: Getty Images.

Today I’m looking at blue-chip companies in the UK’s leading index, the FTSE 100, all of which support dividend yields of more than 6%.

Marketing giant

First up is marketing behemoth WPP (LSE: WPP). Ever since its founder, Sir Martin Sorrell left the business earlier this year, WPP has been struggling to rebuild investor confidence in the group. 

A series of poor trading updates have hardly helped matters, and the stock has continued to slide. Over the past 12 months, it has underperformed the FTSE 100 by 28% excluding dividends.

After the slump, shares in WPP now support a dividend yield of 6.9%. The bad news is, analysts expect the group’s earnings per share (EPS) to fall this year and in 2019. A decline of 23% is pencilled in for 2018 and 2% for 2019. However, even after factoring in falling earnings, the shares still look cheap to me. 

Based on current City predictions, shares in WPP trade at a forward P/E of 7.9. What’s more, including the EPS decline, dividend cover for this year and 2019 will remain above 1.8x. 

These numbers indicate to me that the shares are oversold, and now could be a great time to snap up the stock for its income.

Recovery play

Marks and Spencer (LSE: MKS) has earned itself a reputation over the past few decades as one of the FTSE 100’s most reliable dividend stocks. 

Even though earnings growth has ground to a halt over the past five years, management has maintained the group’s dividend, and I think this will continue because the company is a cash cow.

In my opinion, cash generation is the most reliable indicator of a company’s dividend potential. Even though it is struggling to grow profits, M&S’s free cash flow increased by 37.5% to £300m for the half year to the end of September, easily covering the dividend payout during the period which totalled just under £200m.

As long as this trend continues, I reckon the company’s 6.4% dividend yield is here to stay. And if management does manage to rekindle earnings growth, then I think the shares could move substantially higher from the current level as well.

With a 6.4% dividend yield on offer while you wait, what’s not to like?

Lifetime income

My final FTSE 100 income play is Legal & General (LSE: LGEN)

What I like about Legal is that it manages pensions, which requires its management to operate the business with an ultra-long-term mentality. This indicates to me that the dividend is set at a conservative level, and the group is unlikely ever to pay out more than it can afford. 

With this being the case, I am highly attracted to Legal’s 6.7% dividend yield. 

Analysts have pencilled in growth of 6.8% for 2019, which implies investors are on track to receive a dividend yield of 7.1% next year. I wouldn’t rule out further growth in the years ahead as well. Over the past six years, as earnings per share have more than doubled, Legal’s per share dividend payout has jumped by more than 90%. 

Today you can buy shares in this company for just 8.3 times forward earnings, a valuation that significantly undervalues the business in my humble opinion.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.