The Motley Fool

FTSE 100 dividends: these are the 2 highest yielding shares

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

FTSE 100 (London Stock Exchange Share Index) on Gold Coin Stacks Isolated on White
Image source: Getty Images

This time last year dividends were increasingly hard to come by on the FTSE 100 due to the pandemic and market crash. Now that dividend payments are coming back, who are the top payers? And even though they may have a high yield, what does that mean for now and beyond?

How do dividend yields work?

If a company decides to pay 5p dividend and its current share price is 100p per share, then its yield equates to 5%. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

If this share price dropped to 50p, then that 5p dividend would represent a 10% yield. Investors are often buoyed by a higher yield, but may forget to examine the cause. Is the share price drop a sign of a firm’s diminishing ability to make dividend payments? Sometimes that can be the case. A high yield could be a sign of problems elsewhere in the business.

Whether I am looking into blue-chip stocks on the FTSE 100 or FTSE AIM small-caps for my portfolio, I always do my due diligence and research. I do like a dividend but I also dig deeper into many aspects of a company before investing. I want to check if performance, financials, and external factors will remain favourable in order for my chosen company to be able to pay a consistent dividend for my portfolio. 

Continuing with the scenario mentioned above, even if a firm can still stretch to pay the dividend it committed to, it may not be the best option for shareholders in the long term. Can the firm I am interested in pay a consistent dividend next year and beyond or is it simply delaying facing any problems head on right now? This scenario is a general one I am using but not all cases are like this. The highest yielders aren’t always the most reliable either.

Top FTSE 100 dividend paying stocks

According to dividenddata.co.uk, the top two dividend paying stock on the UK’s leading index today are:

Imperial Brands (LSE:IMB): 8.6%
Evraz (LSE:EVR): 8.4%

Tobacco companies like Imperial Brands have been a go-to for income seeking investors for many years. Despite relatively high and dependable dividend yields that are attractive to me, I do feel that these yields are hiding a cultural shift in smoking habits. Smoking rates are falling in many developed markets and sales of traditional tobacco products are falling too.

A hike in demand for steel has benefited Evraz in recent times as restrictions have eased in many parts of the world. Evraz has a hand in all forms of steel sales as well as its production so has been well placed to benefit. The risk involved is that commodities are at the mercy of many external factors such as political and economic fluctuations, such as the one created by the pandemic. This could affect it in the future and its dividend yield.

My portfolio

As a savvy investor, I am looking to generate an income from my investments. Despite some risks to the FTSE 100 stocks I have mentioned, they currently pay a good dividend and I believe they could for a long time to come. For that reason, I would happily add them to my portfolio.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Jabran Khan has no position in any shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.