Many of Britain’s largest companies are members of the FTSE 100 index of leading shares. Some of these blue-chip firms have large dividend yields right now. Here are three FTSE 100 companies with yields north of 8% I would buy for my portfolio if I had spare money to invest.
Telecoms giant Vodafone (LSE: VOD) has fallen out of favour with many investors. The Vodafone share price is now in pennies, after a 16% fall in the past year.
That has pushed the dividend yield up to 8.1%. However, dividends are never guaranteed and Vodafone previously cut its payout in 2019. With net debt of €45.5bn weighing heavily on its balance sheet at a time of interest rate growth, there is a risk that the company could cut its dividend again.
But I see strengths here too. Vodafone has a large installed user base, including 67m mobile contract customers in Europe and 188m mobile customers in Africa. It enjoys a leading position in many markets, strong brands and a large network. All of those are commercial advantages that could help future profitability.
If the company is disciplined about spending and reduces its debt load, that could help its current dividend survive. I see the current Vodafone share price as offering value for my portfolio — and I like the juicy yield.
A FTSE 100 company with an even higher yield than Vodafone is asset manager M&G (LSE: MNG). Right now the yield is 9.3%. I already own the shares but would buy more if I had cash available to invest.
I expect long-term demand for financial services from both retail and institutional customers to be strong. M&G is well-positioned to benefit from that due to its well-established brand, existing customer base and diversified geographic reach.
The recession could leave people with less money to invest, potentially hurting profits. But as a long-term investor I like the position M&G has in an often lucrative business sector. That could help underpin future profitability.
Insurance group Phoenix (LSE: PHNX) is another of the FTSE 100 shares on my buying list.
Its 8.3% dividend is certainly attractive to me. The company owns well-known financial services brands including Standard Life. I see the insurance market as an attractive one when it comes to generating income that can fund dividends. Over the long term, its economics ought to be fairly clear. That allows well-established providers to set their pricing at a suitably profitable level. Phoenix’s strong brands can help it attract and retain customers.
Although the company swung to a loss last year, its business model means that when it does well it can do very well. In the prior year, for example, post-tax profits came in at £944m. On revenue of £4.7bn, that is impressive.
One risk I see is choppy markets denting investment returns. That might hurt profits. But I would be happy to tuck Phoenix away in my portfolio today for the long term.
The post 8%+ dividend yields! 3 FTSE 100 shares I’d snap up appeared first on The Motley Fool UK.
C Ruane has positions in M&G PLC. The Motley Fool UK has recommended Vodafone. 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 2022