The Best FTSE 100 Dividend Stocks to Watch
Dividend stocks offer investors the opportunity to diversify their portfolio whilst earning regular income, which can either be kept as cash or reinvested.
The UK’s benchmark index, the FTSE 100, is comprised of the 100 largest companies listed on the London Stock Exchange (LSE) by market capitalisation, many of which are generous dividend payers. In this article, we will highlight 3 of the best FTSE 100 dividend stocks for investors to consider for additional income in 2024.
Table of Contents
How to Pick the Top FTSE 100 Dividend Stocks
Before we dive into our picks for the top FTSE 100 dividend stocks to watch in 2024, it is worth quickly identifying some of the metrics to consider when picking dividend stocks and which we ourselves have considered in writing this article.
- Dividend Yield
- Annual dividend per share as a percentage of current share price.
- Dividend Coverage Ratio
- How many times could the company pay its dividends with its current net income?
- Dividend Payout Ratio
- Annual dividend per share as a percentage of Earnings per Share (EPS).
- Continuous Dividend Payments
- Has the company got a proven history of continuously paying dividends?
- Payout Growth
- Have dividend payments been growing over time?
- Debt
- High debt can be a red flag for dividend stocks, as it may impact a company’s ability to make future payouts.
The Best FTSE 100 Dividend Stocks to Watch
The FTSE 100 has a reputation for being home to many companies which, whilst not offering spectacular growth prospects, do pay handsome dividends. But what are the best FTSE 100 dividend stocks for 2024?
British American Tobacco
Whilst many may feel morally opposed to investing in tobacco, there is no escaping the fact that it has a long history of providing shareholder value. Tobacco companies tend to generate a lot of cash, which allows them to reward shareholders with attractive dividends.
British American Tobacco (BAT) operates in around 180 countries and is one of the largest tobacco companies in the world by market capitalisation.
At the time of writing, BAT is one of the FTSE 100 highest dividend yield stocks, with a yield of 10%. It has a track record of increasing dividend payments for more than 20 years, growing from 29.00p per share in 2000 to 230.88p per share in 2023, with this latest dividend covered 1.6 times by earnings.
Of course, the risks associated with investing in BAT and its peers are well-publicised. Increasing awareness of the dangers of smoking have led to a long-term decline in the number of smokers worldwide and industry regulation is constantly becoming stricter.
However, BAT remains profitable, with an operating margin of 44.8% in the first half of 2023. The company is also pivoting away from relying on cigarettes by investing heavily in next-generation products.
Whilst these products currently only make up a small portion of total revenue – 12% in H1 2023 - it’s a portion which is growing quickly, with revenue increasing 61.4% year on year in the first half of 2023.
Rio Tinto
Rio Tinto is the second-largest mining company in the world and is the next entry on our list of top FTSE 100 dividend stocks.
Like many mining stocks, Rio Tinto has a long history of generous payouts to shareholders. However, in 2022, its annual dividend dropped sharply. On the face of it, this sounds bad, but it’s worth looking at the whole picture.
Although it is a diversified miner, the bulk of Rio Tinto’s revenue comes from iron ore. In 2021, with iron ore prices at historic highs, Rio Tinto reported record earnings and, subsequently, declared bumper dividends to reward shareholders.
Given the cyclical nature of the mining industry, part of Rio Tinto’s dividend policy is to supplement ordinary dividends during periods of strong earnings. Consequently, when iron ore prices and earnings dropped in 2022, so too did the company’s dividend payments.
If we look beyond the bumper year of 2021 then, although there are a few instances where ordinary dividends have decreased or remained the same, the overall trend is one of growth. Over the last 15 years, Rio Tinto’s annual ordinary dividend has a compound annual growth rate of 8%. At the time of writing, the FTSE 100 dividend stock has a yield of 5.84%.
National Grid
When picking dividend stocks, it’s important to remember that payouts are never guaranteed. If a company’s earnings take a hit even the most reliable dividend payers may be forced to cut or halt payouts.
Therefore, with high interest rates and the UK’s economy stuttering heading into 2024, dividend investors should try to identify companies that can rely on strong earnings throughout economic turbulence. This is what we have done with the next of our top FTSE 100 dividend stocks.
National Grid owns and operates electricity and natural gas transmission networks throughout Great Britain, where it enjoys a near total monopoly. It’s the only company licensed to transmit electricity in England and Wales, meaning all electricity generated in these countries has to pass through its network.
Regardless of what happens in the economy, we can be sure that people will continue using electricity. Consequently, National Grid should be able to rely on a consistent flow of revenue for their much-needed services.
At the time of writing, National Grid shares have a dividend yield of 5.3% and have continuously hiked payouts for more than 20 years, rising from 12.47p per share in 2000 to 55.44p in 2023. This doesn’t represent extraordinary growth, but these predictable increases coupled with its resilient business is what makes this one of the FTSE 100 dividend stocks to watch.
However, slightly concerning is the company’s debt. In the first half of 2023, net debt rose to £44 billion. That’s a lot of debt, which could create problems for the company down the road, particularly with interest rates at their current levels.
FTSE 100 Highest Dividend Yield Stocks
Now that we have revealed the best FTSE 100 dividend stocks to watch in 2024, to round things off, we have compiled a list of the current ten FTSE 100 highest dividend yielding stocks.
Data Captured: 14 December 2023.
It’s important to remember that, whilst dividend yield is an important metric to consider, it is also important to look beyond it.
A high dividend yield can be indicative of a falling share price, and share prices fall for a reason. If the company is struggling then it may be wise to look elsewhere. Moreover, if a company’s high dividend is unsustainable compared to its earnings, then it is possible that its dividends will drop in the future.
Investing with Admiral Markets
As well as top FTSE 100 dividend stocks, Invest.MT5 account holders can buy more than 4,300 other shares and 200 Exchange-Traded Funds (ETFs) from 15 of the world’s largest stock exchanges! Other benefits include:
- Competitive transaction fees and no account maintenance fee
- The ability to buy fractional shares in 700 of the world’s most exciting companies
- Exclusive access to our Premium Analytics portal, at no extra cost!
To start enjoying these benefits and many more, click the banner below to open an account today:
FAQ – FTSE 100 Best Dividends
How many FTSE 100 companies pay dividends?
In 2023, 95 of the companies listed in the FTSE 100 declared dividend payments.
Which FTSE 100 companies pay quarterly dividends?
Unilever, British American Tobacco, HSBC, GlaxoSmithKline, Imperial Brands, BP and Shell all pay quarterly dividends at the time of writing.
What is the highest dividend yield in the FTSE 100?
Vodafone has the highest dividend yield in the FTSE 100, at the time of writing. However, please note that dividend yields are based on a company’s share price and, consequently, fluctuate throughout the trading day.
Other Articles You May Be Interested in:
- The Best FTSE 250 Dividend Stocks to Watch
- The UK Dividend Aristocrats List
- High Yield Dividend Stocks
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
- With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
- Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
- Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
