The challenge of generating income has got harder as almost half of FTSE 100 dividend stocks have cut their payouts. This is due to the desperate need to conserve cash during the coronavirus pandemic, but has hit income seekers hard.
Do not despair, though. Although FTSE 100 dividend heroes are not as numerous as they were, plenty still boast proud track records of increasing shareholder payouts, year after year. The following ‘fab four’ FTSE 100 dividend stocks can still generate the income you need to get rich and potentially retire early.
One of the great things about dividend stocks is that companies aim to increase their payouts, year after year. This means you don’t just get an attractive income, but it rises over time.
Check out these top FTSE 100 dividend stocks
Online investment platform AJ Bell says just 14 firms now in the FTSE 100 have increased their dividend for at least 10 consecutive years (down from 25 at the start of this year). They have delivered an astonishing average total return of 622% over the last decade, easily beating the average FTSE 100 return of 75%.
This assumes you reinvest your dividends for growth, as everybody should, until you start drawing them for income in retirement.
A key reason why these dividend growth stocks have thrashed the FTSE 100 is that many have risen from the FTSE 250. They were relatively small a decade ago, which allowed them to grow faster than the big blue-chips.
Ashtead Group has done best of all, giving investors a total return of 2589.6% over the period. That would have turned £1,000 into an incredible £26,896. Health technology firm Halma is next best with a total return of 932.4%, followed by Spirax-Sarco Engineering at 768.4%.
Here’s an even more astonishing figure. Of those 14 stocks, their current forecast yield actually works out at 11.7%, based on their June 2010 share price. This shows the massive long-term benefits of investing in FTSE 100 dividend stocks.
I’d buy these income stocks
Only four out of the 14 top dividend-paying stocks were actually in the FTSE 100 a decade ago. The rest have emerged from the FTSE 250.
So who are the ‘fab four’ long-term FTSE 100 dividend winners? Step forward British American Tobacco, global spirits giant Diageo, insurer Legal & General Group and software company Sage Group.
These four stocks are firm favourites among Motley Fool writers, and with reason. Legal & General has delivered a total return of 355.5% over the last decade. Sage is next with 266.1%, followed by Diageo (242.9%) and British American Tobacco (128.3%).
Right now, L&G yields 7.9%, British American Tobacco yields 6.76%, while Sage and Diageo both yield 2.51%.
AJ Bell investment director Russ Mould says when you buy a top FTSE 100 dividend stock, you aren’t just getting income. “A rising dividend can lift a share price, boosting income and capital gains for a powerful total return.”
That’s why we love FTSE 100 dividend stocks on the Fool.
Here's another dividend stock to consider.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?
Fortunately, The Motley Fool is here to help…
Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
But here’s the really exciting part…
This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.
*Please be aware that dividends are variable and not guaranteed.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo, Halma, and Sage Group. 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.