After last year’s dividend cuts and suspensions, I was surprised at how generously leading UK dividend income stocks are paying shareholders today. Last week I suggested nine that are worth exploring. Here are two more of my FTSE 100 income favorites.
Insurer and asset manager Legal and General Group (LSE: LGEN) is probably my first UK dividend income security. To its credit, L&G continued to reward its loyal shareholders throughout the pandemic, even when its rival Aviva gave in to the pressure and cut its dividend.
Today, L&G is offering a forward yield of 6.5%. With the average savings account paying 0.06%, that’s a huge return. Of course, as with all dividends, there are no guarantees. However, the payout is covered 1.7 times by the revenue forecast, which boosts my confidence.
I would buy these two FTSE 100 shares
Legal & General did not survive the pandemic completely unscathed. In March, it reported a 3% drop in annual operating profits to £ 2.21bn, as it set aside an additional £ 110m to cover claims caused by mutant strains of Covid. Still, its fund management arm performed well, with assets under management increasing 6.9% to £ 1.3bn. Better yet, the underlying business remains strong, with capital levels climbing to 192%. This could free up funds to invest in faster growth opportunities.
As well as being one of the UK’s leading dividend income stocks, the Legal & General share price also generated growth. It is up 36% from last year, although the five-year growth is actually less than 20%. For me, L&G is primarily about revenue, and on that front it is performing well.
I stay with the insurance industry for my next choice, Holdings of the Phoenix group (LSE: PHNX). It also deserves the title of Britain’s premier dividend-income stock for maintaining payouts despite the woes of the past year. Today it is down 6.6%, although the cover is slightly thinner at 1.3 times earnings.
I would also buy this leading UK dividend income stock
Phoenix is a different creature from L&G. Its strategy is to buy out old life insurance and pension funds closed to new business and manage them on behalf of members. The more he buys, the greater the economies of scale. It now serves 14 million policyholders.
The Phoenix share price is never going to turn off the lights. Income is the draw here, as the stock price has only climbed 15% measured over one and five years. Management knows this and has kept investors loyal by taking advantage of record cash flow of £ 1.7bn to increase their annual payout by 3%.
The challenge is that Phoenix must continue to buy life pension and legacy life insurance funds in order to continue to grow and fund these dividends. I am therefore delighted to note that it also has an “ open ” activity offering retirement and investment products to new clients, as part of the Standard Life Mark. In 2016, it acquired SunLife from Axa. This diversification should help it remain one of the UK’s leading dividend-income stocks over the long term.
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Harvey jones has no position in any of the stocks mentioned. The Motley Fool UK does not have a position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations that we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a wide range of ideas makes we are better investors.
Motley Fool United Kingdom 2021