As an old-school value investor, my goal is to buy shares in solid, established companies at fair prices. So when share prices fall, I get excited, instead of anxious. For me, falling FTSE 100 prices sometimes offer excellent opportunities for bargain buys.
10 dividend dynamos
Currently, the elite FTSE 100 index offers a dividend yield of around 3.8% a year. That’s not a bad cash yield, but dozens of Footsie stocks beat it.
For example, there are least 20 shares in the index that pay dividend yields of 5%+. And these 10 stocks offer the very highest dividend yields among UK blue-chip shares:
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| Company | Sector | Share price | Market value | Dividend yield | One-year change | Five-year change |
| M&G | Financial | 203p | £4.8bn | 9.7% | -7.9% | -9.9% |
| Phoenix Group Holdings | Financial | 589.2p | £5.9bn | 8.6% | -4.2% | -15.8% |
| Legal & General Group | Financial | 232.5p | £13.9bn | 8.3% | -8.3% | -14.7% |
| Vodafone Group | Telecoms | 96.3p | £26.0bn | 8.0% | -22.2% | -54.3% |
| British American Tobacco | Tobacco | 2,897.5p | £64.8bn | 7.7% | -13.4% | -25.5% |
| Taylor Wimpey | Housebuilder | 126.95p | £4.5bn | 7.4% | -2.0% | -34.3% |
| Aviva | Financial | 418.9p | £11.6bn | 7.4% | -27.6% | -40.7% |
| Barratt Developments | Housebuilder | 500.56p | £4.9bn | 7.2% | +0.7% | -10.9% |
| Imperial Brands | Tobacco | 1,961p | £18.1bn | 7.2% | +17.3% | -24.6% |
| abrdn | Financial | 207.5p | £4.2bn | 7.0% | +9.9% | -49.9% |
These cash yields range from 7% to nearly 10% a year. Across all 10 shares, the average dividend yield is almost 8%. Now that’s what I call high yields.
However, other than the three positive returns in bold, all 10 shares have fallen in value over one year and five years. But falling shares prices translate into even higher dividend yields, all else being equal.
This is not a proper portfolio
In theory, I could buy all 10 stocks today and watch my cash dividends come rolling in. But there are three problems with this approach.
First, a portfolio consisting only of these 10 shares would be highly concentrated. Five stocks are in the financial sector, two are in tobacco, two are in housebuilding and one is in telecoms.
Second, this theoretical portfolio could be both risky and volatile, simply because it would not be spread widely enough. For me, a proper portfolio needs at least 20 to 25 stocks in order to spread my risk.
Third, my wife refuses to have tobacco stocks in our family funds, so the two big tobacco firms get thrown out. This is one personal example of ESG (environmental, social and governance) investing.
I already own three of these stocks
For the record, my wife owns shares in Aviva, Legal & General Group and Vodafone Group in our family portfolio. We purchased all three stocks for their market-beating dividend yields.
Also, I have added three of these high-yielding stocks to my watchlist for future buys. These high-yielders are abdrn, M&G and Phoenix Group Holdings. The only reason we don’t already own these three shares is that I don’t have enough spare cash to invest at present.
Finally, history has taught me that investment strategies based around high yields can produce handsome long-term returns. However, this is by no means a guaranteed route to success — especially when companies unexpectedly cut their dividend payouts.
Nevertheless, I remain a big fan of dividend investing, not least for the extra passive income it provides to support my family’s fast-rising expenses!
