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Summary
- Dividend investing is a common investment strategy for investors seeking stable passive income from their equity investments.
- Several companies had paused dividend pay outs in 2020 owing to lockdown related uncertainty, however as the economy has rebounded, many have resumed their pay outs once more.
Dividend investing is a common investing strategy used by investors who are seeking to have a steady passive income stream from their stock investments. Several companies had paused their dividend pay outs in 2020 due to pandemic induced uncertainty.
However, as the UK economy has started to rebound, many companies have resumed paying out dividends once again.
Let us take a closer look at 5 FTSE 100 listed stocks with the highest five-year average dividend yield on the London Stock Exchange:
- EVRAZ plc (LON: EVR)
Evraz is a multinational steel manufacturing and mining company. The company’s majority shareholder is billionaire investor Roman Abramovich, with a 30 per cent stake. Abramovich also owns the UK’s premier league football club Chelsea F.C.
Evraz declared an FY 2021 interim dividend of 22 pence per share and had a dividend coverage ratio of 0.97 in FY 2020.
EVR also has the highest five-year average dividend yield among its FTSE 100 peers, at 9.7 per cent.
- M&G PLC (LON: MNG)
Global investment management company M&G is another historically high paying dividend stock and is another FTSE 100 stock.
MNG’s total dividend for FY 2020 stood at 18.23 pence per share. It had paid an interim dividend of 6.00 pence per share on 30 September 2020 and a second interim dividend of 12.23 per share on 28 April 2021.
MNG’s five-year average dividend yield staood at 9.3 per cent and had a dividend coverage ratio of 2.44 in FY 2020.
- Imperial Brands PLC (LON: IMB)
Imperial Brands is the fourth-largest tobacco firm in the world. IMB announced a first interim dividend of 21.06 pence per share to be paid on 30 June. The second interim dividend of 21.06 pence per share is slated to be paid on 30 September.
IMB’s dividend coverage ratio stood at a multiple of 1.85 in FY 2020. Usually, a dividend coverage of over 1 indicates the pay outs are coming from profits and that it is not using the company’s existing cash reserves.
IMB’s five-year average dividend yield stands at 8.0 per cent.
- BT Group PLC (LON: BT.A)
Telecommunications major BT Group’s FY 2020 total dividend pay-out was at 4.62 pence per share which were paid on 3 February 2020. BT has not announced a dividend payment for FY 2021 yet.
BT’s five-year average dividend yield stands at 7.3 per cent, while its dividend coverage ratio in FY 2020 stood at a multiple of 5.09.
- Persimmon PLC (LON: PSN)
Persimmon is an FTSE 100 listed home building company. Its FY 2020 total dividend stood at 235 pence per share. It paid its FY 2020 third interim dividend of 125 pence per share on 26 March this year.
Persimmon’s five-year average dividend yield stands at 7.2 per cent, while its dividend coverage ratio in FY 2020 was at a multiple of 2.01.
Also Read: Persimmon plc (LON:PSN) releases robust performance with strong housing demand
A stock offering stable and high dividends can indicate a company’s financial strength and strong fundamentals. Although, investors should note that a high dividend paying company should not be the only reason to invest in, as dividends can be reduced or increased. Dividends can also be paid from cash reserves instead of profits.
Thus, researching a company well before investing in it is essential for any form of investment strategy, including dividend investing.
Tags: dividend stocks, Evraz plc, M&G PLC, Imperial Brands PLC, BT Group PLC, Persimmon PLC
