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Could these 6%-yielders offer the safest income on the FTSE 100?

Wouldn’t you prefer to earn a yield of 6% a year from a top FTSE 100 stock than, say, 1%, or 1.5% from a savings account? If the answer is yes, here are two stocks I think you might like to consider.

On the rise

The first is life assurance and pension consolidator Phoenix Group Holdings (LSE: PHNX), which has a market-cap of £5bn, around 10m policyholders, and £226bn of assets under management. The main business is buying and managing life assurance and pension funds that are closed to new business and slowly running them down, although it manufactures new products and policies as well, and has a distribution business, SunLife.

It share price is up 40% over the last five years, against growth of 12% on the FTSE 100 as a whole over the same period. However, the real attraction is the dividend, as the stock currently offers a forecast yield of 6.7%. Although it’s covered only once, Phoenix generates plenty of cash, £664m in 2018, up from £653m the year before, while group operating profit almost doubled to £708m. Its shareholder capital coverage ratio is a solid 167%.

Growing concern

Phoenix is the largest life and pensions consolidator in Europe, where it has a £540bn market to aim at. As G.A. Chester point out, it has grown through acquisitions, including the transformational £2.9bn acquisition of Standard Life Assurance from Standard Life Aberdeen.

It looks like a steady business with secure cash flows, so I’m not surprised to see it trading near fair value at 14.4 times forecast earnings. Management also claims to be Brexit ready. This is one to buy for the income, and treat any share price growth as a bonus.

Tune in

While Phoenix is an unfamiliar name, everyone knows ITV (LSE: ITV). As well as a commercial broadcaster, it is also a generous FTSE 100 dividend stock, with a current forecast yield of 6.1%. This is covered 1.7 times by earnings, which gives added comfort.

ITV is operating in a competitive world, however, as it has to beat off the challenge from Netflix and other binge TV specialists, while also competing with the internet for eyeballs, and everything else in our time-poor lives. Plus there’s been a squeeze on advertising revenues. However, viewing numbers rose 3% last year, while ad revenues were up 1%. Total group revenues to £3.21bn, helped by a 5% rise in total non-advertising revenues to £1.97bn.

On the box

ITV also has new tricks up its sleeve, such as the BritBox hook-up with the BBC, which now has 500,000 US subscribers, and is set to launch an on-demand service in the UK. This will cost money though, up to £25m this year, rising to around £40m in 2020, but declining thereafter.

Inevitably, there are risks. As Peter Stephens points out, it’s highly exposed to the slowing UK economy and all the uncertainty that Brexit brings. I’m concerned about earnings, which are forecast to drop 12% this year, although rise 5% in 2020. However, trading at just 9.7 times forward earnings these concerns are in the price, while the dividend is forecast to hit 6.7% in 2020. ITV remains compelling viewing.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.