Here are the 5 highest-yielding dividend stocks in the FTSE 100 today (and my top pick)

It’s no secret that the FTSE 100 is stuffed full of high-yield dividend shares. At present, nearly a quarter of the stocks in the index sport yields in excess of 5%.

Here, I’m going to highlight the five highest-yielding stocks in the Footsie today. I’ll also name my top pick to consider for income out of the five shares.

Finding the highest yielders

To find the five highest yielders, I sorted the index by ‘trailing-12-month yield’. Doing this allowed me to compare yields more accurately, as different companies have different reporting periods and pay dividends at different times.

I’ve put the five stocks with the biggest yields in the table below. I’ve also put their trailing-12-month yields as well as their ‘rolling one-year yields’ (a forward-looking measure of income) and their forward-looking dividend coverage ratios (dividend coverage is earnings per share divided by dividends per share).

Among the five stocks, we have three financial companies. We also have a packaging company and an advertising group. It’s worth noting that housebuilder Taylor Wimpey, which also has a high yield, just got booted out of the index.

My top pick

Now, if I’d been asked to pick a stock from these five a few years ago, I probably would have gone with insurer Legal & General. However, these days, I have a bit less conviction in this stock.

Recently, the company has reduced its dividend growth to 2% per year (which is less than the rate of inflation). Meanwhile, dividend coverage has dropped to rather concerning levels (a ratio near one is a red flag).

Given those issues, my top pick for high income from that five today is M&G. It’s a leading savings and investment/retirement company that serves around 4.5m retail clients and over 900 institutional clients globally.

Of the five stocks, it has one of the lowest yields on a trailing basis. But it has the highest level of expected growth at about 5% (which is higher than inflation) and a reasonable level of dividend coverage.

One other thing worth mentioning is that the company has increased its dividend every year since it was spun off from Prudential in 2019. Over that timeframe, both WPP and Mondi have cut their payouts.

Looking beyond the numbers (which is always important when investing for income), I like the long-term story here. As an investment manager, M&G should benefit from rising stock markets and growing retirement savings over time.

This backdrop should help to boost earnings. This in turn, should allow the company to continue increasing its dividend.

Of course, M&G operates in an industry that is volatile at times. This can lead to sharp share price falls.

We saw this in March and April when investors were worried about an economic collapse. In the space of a few weeks, the share price fell more than 20%.

I believe it’s worth considering as an income investment, however. If one takes a long-term view, I think this stock could provide attractive returns.