Some UK dividend stocks are carrying yields well above their historical norms. Here are three from the FTSE 100 whose forecast payouts for FY 2025 look very attractive.
Asset management
First up is investment management firm M&G (LSE: MNG). The stock is offering a mouthwatering forward yield of 9.9%, which is why I’ve been considering it for my portfolio recently.
The only reservation I have is that I already own shares in Aviva (LSE: AV.), HSBC, and Legal & General.
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I’m a bit worried about overexposing my portfolio to financial stocks. Especially as they’re all susceptible to tumbling if the global economy tanks. If that happened, customers could pull more money out of M&G’s funds.
Still, I think the firm has successfully navigated a challenging macro environment over the past couple of years. In H1, it reported an adjusted operating profit of £375m, which nearly matched the previous year’s figure.
As of June, 62% of its mutual funds ranked in the upper two performance quartiles over three years, and 66% over five years. In institutional asset management, over 70% of funds outperformed their benchmarks over the same periods.
The firm’s Solvency II coverage ratio rose to 210%, indicating a strong capital position. The dividend edged up from 6.5p per share to 6.6p.
The yield is currently the second-highest in the FTSE 100 (discounting Vodafone, whose impending cut shows that high yields aren’t guaranteed).
Tobacco
Next up is British American Tobacco (LSE: BATS). The tobacco giant is sporting a dazzling 8.7% forward dividend yield.
The stock’s up 20% since I first started buying it in March. Yet it still looks severely undervalued on a forward price-to-earnings (P/E) multiple of just 7.6 for 2025.
That’s far less than both the FTSE 100 average and international peers like Altria and Philip Morris International.
Granted, cigarette sales are on the decline globally and its non-smoking division (vaping, heated tobacco, pouches, etc) faces stiff competition. These are risks, for sure.
Yet the company continues to make substantial profits — enough to afford the generous dividends — while buying back a load of its own shares.
If the stock continues to trade at a steep discount to US peers, I think it’s just a matter for time before the firm switches its primary listing to New York. Not great for London, but this may potentially result in a higher valuation.
Insurance
Finally, there’s Aviva. The insurance stock has a forecast dividend yield of 7.7%. That’s not as high as the previous two, but it’s still more than double the FTSE 100 average.
In the first half, the company generated growth across the board. Group operating profit rose 14% to £875m, with general insurance premiums in the UK and Ireland up 18% to £3.8bn.
The interim dividend was hiked 7% to 11.9p per share, while a £300m share buyback was carried out.
CEO Amanda Blanc was bullish: “Sales are up. Operating profit is up. The dividend is up. Our plan to deliver more for customers and shareholders is working really well.“
As with M&G, a market downturn would negatively impact the value of its investment portfolio and diminish investor sentiment around the sector.
Still, Aviva’s management is confident about further returns of capital to shareholders. I’d happily buy more shares with spare cash.
