You’ve probably heard the expression that cash is king. The meaning behind it is that while holding assets such as stocks, property and gold is good, there’s nothing quite like cash in the bank. For this reason, income investing is a popular strategy for many investors today.
The premise involves investing in a stock that pays out a regular dividend that can be banked as income. Not all firms pay out dividends, and the Covid-19 pandemic has seen some firms cut dividends for this year. So which FTSE 100 stocks with a higher dividend yield than the FTSE 100 average (4.41%) are still paying out?
Income investing stocks
BP is the first firm I would flag up. I’m positive on the firm, and even more so due to the recent oil price slump. The cost-cutting measures being taken and the likely intervention from the oil governing body (OPEC) to restrict supply should be positive for profitability into the mid and longer term. Further, the business hasn’t announced any dividend cuts as of yet, with a current yield of just over 10%.
Legal & General has gone a step further and committed to paying out the dividend for this year, amounting to a payout of around £753m. The insurer should be fairly insulated from a serious revenue hit, given the industry it operates in. Whether the dividend will continue into the future remains to be seen, but for the moment the dividend yield sits just over 8%.
The wealth manager St. James’s Place has seen a volatile few months. While inflows in the first quarter were seen at £2.37bn, assets under management fell by around £17bn. This reflects the desire of some investors to pull out of investments and sit in more liquid alternatives like cash. So while the firm announced it will withhold 33% of the dividend, it will still pay 66% of it to income investors. The exact yield is yet to be calculated, but will likely sit around 4%-4.5%.
One firm I have written about recently is J Sainsbury. Given the lockdown, supermarkets have become one of the few sectors to not see an outsized fall in consumer spending. The necessary goods it offers makes it resilient during a downturn. This is why it’s often cited as a defensive stock. Sainsbury’s has just announced a deferral of the dividend to later this year, but not a cut. Therefore, the dividend yield is still a valid metric to use, and sits at 5.4% currently.
My Foolish takeaway
For income investors, there are still plenty of FTSE 100 firms in which to invest. Sure, the dividend outlook for some large firms isn’t positive. But the index is diverse enough to be able to find examples where the dividend is still going to be paid. Even if the dividend for one of the above firms is cut, it’s likely only temporary. And of course, as long-term income investors, dividend income is something that’s best left to accumulate over many years.
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Jonathan Smith and The Motley Fool UK have 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.