Dividend payments can offer a nifty way to boost your passive income. Yet, while a number of FTSE 100 constituents pay dividends, yields are sometimes very low.
So, which FTSE 100 members have the highest dividend yields right now? Let’s take a look.
What is a dividend yield?
A dividend is the portion of company profits paid to shareholders. Many investors consider such payments as a ‘reward’ for putting their capital at risk by investing in a particular company.
A ‘dividend yield’ refers to the percentage of a company’s share price compared to the dividend it pays out to shareholders. So, if a company with a share price of £100 pays out a dividend of £3 per year, then its dividend yield is 3%.
As a rule of thumb, a dividend yield between 4% and 6% would be considered decent. However, stocks with a lower dividend yield than this shouldn’t necessarily be avoided. That’s because investors may choose to invest in stocks with low dividend yields for other reasons. For example, a stock with a low dividend yield may still have huge potential for growth.
In other words, the rate of a company’s dividend yield is typically just one factor that active investors take into account before picking stocks.
What FTSE 100 stocks pay the highest dividends?
While dividend yields aren’t the be-all and end-all, stocks with high payouts are still favoured by many investors. So, here are the five FTSE 100 stocks with the highest dividend yields right now according to CMC Markets.
Rio Tinto Limited
Imperial Brands plc
Phoenix Group Holdings plc
Let’s take a closer look at each of the five FTSE 100-listed companies that report high dividend yields.
1. Rio Tinto Limited
Rio Tinto claims top spot in the dividend yield table. Officially the world’s second-largest metals and mining company, the organisation reports a hefty dividend yield of 10.48%.
Aside from this high yield, if you’d invested in Rio Tinto at the start of the year, it’s likely you’ll be sitting on a very tidy profit right now. That’s because its share price has climbed by more than 16% since January.
2. Persimmon plc
Persimmon takes second place in the dividend yield table. The house-builder reports a dividend yield of 10.29%.
However, it’s fair to say that Persimmon has had a rotten 2022 so far. That’s because its share price has dropped a massive 23% since the year began, which partly explains its high dividend yield.
3. Imperial Brands plc
The company paying the third-highest dividend yield is Imperial Brands. The tobacco giant’s dividend yield of 8.56% is very respectable, though its share price has fallen 1.4% since the year began.
4. M&G plc
M&G is another share paying a hefty dividend yield. At 8.47%, the investment management company claims fourth place among FTSE 100 constituents, despite being a relatively new member in the UK’s largest share index. Since the year began, M&G shares have risen by 6%.
5. Phoenix Group Holdings plc
At 7.62%, insurance company Phoenix Group Holdings reports the fifth-highest dividend yield. Since the beginning of January, its share price has dropped 3.2%.
What else should you know about dividend yields?
Dividend yields can change regularly. That’s because they are relative to the value of a company’s share price. So, for example, stocks that plummet can report high dividend yields for this very reason.
Yet this isn’t the case for all stocks. Looking at the table above, Rio Tinto is the standout performer. That’s because, as well as boasting a high dividend yield, its stock has also risen this year. That said, there’s no guarantee the company will continue its strong performance in the future.
Are you looking to invest? If you’re looking to invest, bear in mind that the past performance of any stock should not be used as an indicator of future performance.
The post Revealed! The FTSE 100 stocks with the highest dividend yields appeared first on The Motley Fool UK.
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