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With their 7% dividend yields, I’d consider buying these FTSE 100 stocks

Even though the FTSE 100 is currently trading near its all-time high, there are still plenty of bargains on offer in the index. Income seekers, in particular, are spoilt for choice when it comes to picking out high-yielding, high-quality income stocks.

Here are two of the market’s top income plays that investors can buy today.

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Aviva

It’s difficult to establish precisely why the market has taken such a disliking to insurance group Aviva (LSE: AV) over the past 24 months. Shares in the company crumbled at the end of 2018, and they’ve struggled to recover ever since.

Historically, the stock commanded a mid-teens price-to-earnings (P/E) ratio. However, since late 2018, the multiple has remained in the single digits.

At the time of writing, the stock is trading at a P/E of 7.2. This suggests shares in the insurer offer a wide margin of safety. On top of this, the stock supports a dividend yield of 7.6%. The payout is covered 1.8 times by earnings per share.

It also looks as if the company’s fortunes will start to turn around soon. Under the guidance of new CEO Maurice Tulloch, Aviva is going to slim down its corporate structure.

The new management is also aiming to generate £8.5bn-£9bn of cash flow between 2019 and 2022, and achieve a return on equity of 12%. If the firm hits these targets, it’ll make Aviva one of the most cash generative and profitable insurance companies in Europe.

That should drive a re-rating of the stock. In the meantime, investors can pick up that 7.6% dividend yield. As such, now could be a great time to snap up a share of this business before it starts to take off.

M&G PLC

Uncertainty also appears to be haunting the shares of recently independent European asset manager M&G PLC (LSE: MNG).

Figures suggest this firm is dealing at a P/E of 6.4. Nevertheless, it seems as if the market is waiting for confirmation from the company it can meet these earnings targets before giving the stock the benefit of the doubt. 

Indeed, as a new business, it seems investors don’t entirely trust City growth estimates for M&G just yet. In many respects, that’s to be expected. Only time will tell if the group can meet management’s growth projections.

Nonetheless, the stock could be an exciting opportunity. If the organisation does perform as expected, there could be a considerable upside on offer for the shares from current levels. Indeed, the rest of the asset management sector is trading at a P/E of 14.

On top of this discount valuation, shares in M&G support a dividend yield of 6.4%. The payout is set to rise further in 2021, leaving investors with a dividend yield of 7.4%. That’s extremely attractive in the current interest rate environment.

Management has also promised special dividends, which could catapult the distribution into the double-digits. Therefore, the risk-reward ratio for the stock now looks quite attractive.

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Rupert Hargreaves owns shares in M&G Plc. 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.