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These FTSE 100 dividend shares offer today’s biggest yields

Close-up of British bank notes
Close-up of British bank notes

With all the negativity and belt-tightening going on these days, we might expect pressure on the FTSE’s dividend shares. But there are some great yields and big share buybacks from UK’s biggest companies out there.

In fact, 2022 looks like it could challenge 2018 for the FTSE 100‘s best dividend year ever. Forecasts suggest a massive £81.5bn in ordinary dividends this year.

Averaging several sources, here’s what appear to be the 10 biggest forecast dividend yields in the FTSE 100 this year. Forecasts vary, so you’ll find slightly different lists elsewhere.

Company

Recent
price

12-month
change

Forecast
P/E

Forecast
yield

Forecast
cover

Persimmon

1,329p

-50%

5.4

18%

1.1x

M&G

180p

-10%

-5.3

11%

1.0x

Rio Tinto

4,670p

+2.5%

6.4

10%

1.7x

Barratt Developments

380p

-43%

6.7

9.9%

1.4x

Taylor Wimpey

97p

-37%

5.4

9.7%

2.0x

Phoenix Group

544p

-18%

-7.8

9.1%

0.5x

Vodafone

99p

-12%

14

7.9%

1.0x

Intermediate Capital Group

1,072p

-52%

12

7.5%

1.6x

Legal & General

233p

-19%

6.8

8.2%

1.9x

Imperial Brands

2,106p

+33%

9.5

6.8%

1.6x

Tough 12 months

Most of these stocks have had a tough 12 months, with some pretty hefty share price falls. Whether that makes them good long-term dividend buys depends on the reasons behind the falls.

If it’s just negative market sentiment, buying after a fall can be very profitable. I think that’s especially true for dividend shares. As well as any possible share price recovery, we get to lock in that high dividend yield for as long as we hold the investment.

A couple of these have enjoyed gains over the past 12 months. Imperial Brands is the stand-out, up 33%. But I see that as a long overdue price correction, still leaving its price-to-earnings (P/E) multiple at just 9.5. Investors have shunned the tobacco industry for years, despite its strong cash-generative profits.

Sector domination

Another note is the way market sectors can dominate. There’s only one miner in the list now, Rio Tinto. But if I’d done this just three months ago, we’d have seen two or three more up there. Commodities demand has been falling, partly as a result of general global conditions, but also from the economic damage caused by China’s zero-Covid policy.

It doesn’t mean I wouldn’t buy a mining stock for long-term dividend income. But I’d be keenly aware that the sector can be very cyclical.

Housebuilders are up there, and it’s all about an expected weakening of the property market. Lloyds Banking Group has just predicted that house prices will fall 8% next year. But even with that, I think housebuilder shares are oversold. They can still make profits and generate cash even when prices are falling.

Careful with cover

I also see there’s a wide range of cover by earnings. That can be an indication of the likely progressive strength of a dividend in the coming years.

I haven’t looked at the individual risks with most of these stocks, and I’d definitely do that before I invested in any. But I think there’s attractive potential to put together a small portfolio of maybe four or five long-term dividend shares from this list.

The post These FTSE 100 dividend shares offer today’s biggest yields appeared first on The Motley Fool UK.

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Alan Oscroft has positions in Lloyds Banking Group and Persimmon. The Motley Fool UK has recommended Imperial Brands, Lloyds Banking Group, and 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