With the aim of increasing my dividend income streams, I would consider buying some FTSE 100 shares for my ISA.
Being a member of the FTSE 100 in itself does not make a share good or bad. The index is basically a collection of the largest companies traded on the London Stock Exchange. Such large companies may have less chance of fast growth than far smaller competitors. But they could also be reaping the rewards of being very large, established businesses. That can fund substantial dividends.
Here are five FTSE 100 shares I would consider for my portfolio today, each offering a yield of at least 5%.
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Financial services firms
I would consider investment manager Abrdn. The fund manager owns established names such as Standard Life but it’s also trying to expand its business by acquiring newer brands. Abrdn has been an inconsistent financial performer in recent years. It cut its dividend a couple of years ago. But I am hopeful its improved earnings last year reflect a positive trend for the company. I expect demand for financial services to remain high, which could reward Abrdn’s investment in expanding its offering. I hold it in my portfolio and am attracted by the current 7.1% yield.
I would also think about adding Legal & General to my holdings. The insurer pays a dividend yield of 6.6% and has set out plans to increase its payout. Dividends are never guaranteed and heavy storm damage could push up the company’s costs for household policy claims. But with an iconic brand, large customer base and underwriting experience, I would be happy to tuck the firm into my ISA for its income potential.
Tobacco giant
I see British American Tobacco as an attractive company to hold in my portfolio for income. As the name suggests, the company manufactures a variety of tobacco products, from cigarettes to more recent innovations such as a vaping range. It owns a number of premium brands such as Lucky Strike. That helps give it pricing power.
One risk I see here is flagging cigarette sales hurting both revenues and profits. But its massive cash flows help it pay a generous dividend. The yield is 6.5%.
Telecom yielder
I also like the look of telecoms giant Vodafone as a possible addition to my portfolio.
Telecoms involves big numbers. It takes a lot of money to build a network like Vodafone’s. That can add risks, as paying down debt lowers profits available to fund dividends. But such networks can also allow a company to offer premium services to tens of millions of customers.
Currently, the company offers a 6% yield. I would consider buying it.
FTSE 100 housebuilder
The fifth possible purchase for my portfolio would be housebuilder Persimmon. With a whopping 11.2% yield, is this dividend payer too good to be true? At the moment, I do not think so. Persimmon barely covers its dividend from earnings, but it does manage to do so.
If there is a housing downturn, though, earnings could well fall. The dividend may be cut. But I reckon that risk is already priced into this stock. Persimmon is a well-established housebuilder with attractive profit margins. With a long-term mindset, I would be happy to add this double-digit yielder to my portfolio at the moment.
