At the beginning of the coronavirus crisis, many FTSE 100 companies decided to cut their dividends. However, over the past few months, these businesses have started to reintroduce their payouts.
With that in mind, I’m going to take a look at the five highest-yielding FTSE 100 shares I’d buy for my portfolio today.
FTSE 100 income
The first company on my list, with the highest dividend yield of any FTSE 100 stock, is tobacco giant Imperial Brands. Analyst forecasts suggest the group will distribute 140p per share to investors in its current financial year, and a similar amount next year. This implies investors buying the stock today could be in line for a dividend yield of just over 11%.
As well as these attractive income credentials, the shares also look cheap after recent declines. Indeed, the stock is trading at a forward price-to-earnings (P/E) ratio of around 5. That’s compared to the market average of 13.
The next company on my list is financial services giant Legal & General. With a dividend yield of just under 10%, this organisation has one of the highest dividend yields in the FTSE 100. It also has an impressive dividend growth track record. The payout has grown at a compound annual rate of around 5% for the past six years. In my opinion, this shows management is committed to rewarding shareholders with steady dividend growth and cash returns.
Piles of cash
FTSE 100 homebuilder Persimmon has returned piles of cash to its investors over the past five years. I think this trend will persist as the company continues to capitalise on the booming demand for property in the UK. Despite the pandemic, the business has continued to shift new builds, and this bodes well for future dividend growth. Analysts have pencilled in a potential dividend yield of 9% for the next financial year. With a cash-rich balance sheet, I think the chances are high that the business will meet this lofty target.
Mining giant Rio Tinto is set to yield over 7% in 2021, according to current analysts projections. The FTSE 100 group is the world’s largest iron ore producer, which gives it tremendous economies of scale. It has some of the best profit margins in the business. What’s more, the price of iron ore has jumped in 2020. This suggests the firm’s bottom line could see a large increase this year. That would be hugely positive news for the stock’s dividend potential.
My fifth and final FTSE 100 dividend pick is Phoenix Group. This enterprise manages a large book of pension and life insurance products. By combining thousands of policies, it can achieve substantial economies of scale and large cash returns. These large cash profits support the company’s 6.8% dividend yield. As Phoenix continues to snap up new books of life and pension assets, I reckon it’s likely this distribution will continue to increase in the years ahead.
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Rupert Hargreaves owns shares in Imperial Brands. The Motley Fool UK has recommended Imperial Brands. 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.