UK markets closed
  • FTSE 100

    7,901.80
    +81.64 (+1.04%)
     
  • FTSE 250

    20,593.46
    -21.24 (-0.10%)
     
  • AIM

    889.79
    +1.03 (+0.12%)
     
  • GBP/EUR

    1.1151
    -0.0054 (-0.48%)
     
  • GBP/USD

    1.2038
    -0.0191 (-1.56%)
     
  • BTC-GBP

    19,022.25
    -526.11 (-2.69%)
     
  • CMC Crypto 200

    535.42
    -1.43 (-0.27%)
     
  • S&P 500

    4,136.48
    -43.28 (-1.04%)
     
  • DOW

    33,926.01
    -127.89 (-0.38%)
     
  • CRUDE OIL

    73.23
    -0.16 (-0.22%)
     
  • GOLD FUTURES

    1,877.70
    +1.10 (+0.06%)
     
  • NIKKEI 225

    27,509.46
    +107.36 (+0.39%)
     
  • HANG SENG

    21,660.47
    -297.93 (-1.36%)
     
  • DAX

    15,476.43
    -32.77 (-0.21%)
     
  • CAC 40

    7,233.94
    +67.67 (+0.94%)
     

5 FTSE 100 shares I own for big dividends in 2023

Young female hand showing five fingers.
Image source: Getty Images

In late 2021, I wrote many articles warning that global asset prices were extreme. I repeatedly predicted that we were in an ‘everything bubble’ doomed to collapse. Alas, my forecasts proved accurate across the globe — except in the UK, where the FTSE 100 index held firm.

The FTSE 100 was my favourite in 2022

Over the past 12 months, the US S&P 500 index has lost 18.9% of its value, having rebounded from its 13 October low of 3,491.58 points. Meanwhile, the tech-heavy Nasdaq Composite index has crashed by 31.5% in 12 months, also bouncing back since its 13 October bottom.

However, as I write, the UK’s FTSE 100 index stands at 7,649.95 points, up 1.8% over the past year. Adding in cash dividends takes this return to nearly 6%. In other words, the Footsie has been a safe port in global market storms. But why?

Footsie stocks were very cheap in 2021-22

For years, the FTSE 100’s big problem was that it was packed with ‘old economy’ stocks, including banks, miners and oil companies. During the 2009 to 2021 investing boom, global investors ignored or overlooked these old-school stocks and instead bought go-go growth stocks, such as US tech firms.

As a result of this strong secular trend, the valuation gap between value shares and growth stocks stretched to its widest level in over 200 years. This incredible divergence caught my eye and finally prompted me to start buying cheap UK shares. Hence, from mid-2022 onwards my wife and I bought into several quality companies at bargain prices.

Five Footsie shares we bought for big dividends

In total, we bought 10 new UK shares for our family portfolio from late June onwards. For example, we bought the following five FTSE 100 shares for their high earnings yields and market-beating dividend yields. And sorry for all the figures, but I’m a lifelong number geek!

Company

Aviva

Barclays

L&G

Lloyds

Rio Tinto

Business

Insurer

Bank

Insurer

Bank

Miner

Share price

452.8p

173.6p

258.5p

48.34p

5,927p

52-week high

606.58p

219.6p

309.9p

56p

6,343p

52-week low

341.92p

132.06p

191.37p

38.1p

4,424.5p

12-month change

-19.1%

-12.3%

-14.5%

-4.6%

+17.7%

Market value

£12.7bn

£27.6bn

£15.4bn

£32.5bn

£98.2bn

Price-to-earnings ratio

9.3

5.7

7.6

8.0

6.6

Earnings yield

10.8%

17.7%

13.1%

12.5%

15.2%

Dividend yield

6.6%

3.6%

9.2%

4.4%

8.9%

Dividend cover

1.6

4.9

1.4

2.8

1.7

This isn’t a complete portfolio

I must point out that this isn’t a properly balanced portfolio. It includes two banks and two asset managers, plus a global mega-miner. This is just a snapshot of a part of our portfolio — and one that’s highly concentrated on financial stocks.

Having bought these five shares, we’re keen to hold them for the long term. After all, their average earnings yield is 13.9%, which is almost twice that of the wider FTSE 100. What’s more, their average dividend yield is around 6.5% a year. That’s almost 2.5 percentage points higher than the Footsie’s yearly cash yield of about 4%.

To sum up, I think these companies have the potential to produce decent dividends for my family for many years to come. Of course, I could be wrong and I also expect their share prices to be volatile. But that’s life, agreed?

The post 5 FTSE 100 shares I own for big dividends in 2023 appeared first on The Motley Fool UK.

More reading

Cliffdarcy has an economic interest in Aviva, Barclays, Legal & General Group, Lloyds Banking Group, and Rio Tinto shares. The Motley Fool UK has recommended Barclays Plc and Lloyds Banking Group Plc. 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.

Motley Fool UK 2023