This has been a tough year for investors seeking dividend income from FTSE 100 stocks. But don’t despair, you can still find some incredible yields. Here, I’ve picked 10 solid blue-chip stocks that look set to yield between 5.8% and 9.4% in 2021. That’s astonishing, given that high street savings accounts now pay just 0.01%.
While investing in FTSE 100 stocks is never without risk, these look safer than most to me. Better still, you can take the income free of tax inside your Stocks and Shares ISA allowance.
Tobacco giant Imperial Brands Group is one of the highest yielding stocks on the index. It should pay income of 9.4% next year, according to AJ Bell. Better still, this is nicely covered 1.85 times by earnings. While tobacco smoking’s in decline, the group’s market share is growing and the cash should keep rolling in for years.
I’d buy these FTSE 100 stocks for the long term
The same goes for British American Tobacco, which should yield 7.9% in 2021, with earnings cover of 1.53. While Imperial Brands cut its dividend last year, British American Tobacco is one of a select band of FTSE 100 stocks that hasn’t cut for more than a decade.
Insurance group Legal & General Group also stuck by its dividend this year while sector rival Aviva scrapped its shareholder payout. In 2021, L&G is forecast to yield a mighty 6.7%, again, with generous cover of 1.64 times.
I wouldn’t rule out Aviva though, which now plans to restore its dividend. AJ Bell reckons its should give investors income 7.2% in 2021, generously covered 2.07 times by earnings. Both FTSE 100 stocks look cheap right now, trading at just 8.47 and 5.20 times earnings respectively.
Utility stocks are a great source of income. That looks set to continue in 2021, with National Grid forecast to yield 5.8% a year, and power giant SSE on course to pay 5.9%. Cover is thin at just over one times earnings. However, utilities need less of a cushion because their earnings are regulated and more predictable than most.
Dividend stocks thrash cash
I think the mining sector could enjoy a strong 2021, as China spearheads the global recovery. FTSE 100 stocks Rio Tinto and BHP Group are a great source of income and share price growth. Rio is set to yield 5.9% next year, with dividend cover of 1.56. BHP Group is expected to yield 4.6%, with cover of 1.49 times earnings.
It’s hard to list top FTSE 100 dividend stocks without including pharmaceutical giant GlaxoSmithKline. Glaxo held its dividend per share at 80p for years, but investors can still expect income of 5.8% next year, with earnings cover solid at 1.45.
It would also be remiss to ignore FTSE 100 dividend stock pick BP, which should yield 7.9% next year. Although it may have to dip into its coffers to sustain payouts, it should benefit as the oil price recovery gathers pace.
FTSE 100 stocks like these offer a fantastic source of long-term income and growth, especially given today’s rotten savings rates.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and 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.