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Buying FTSE 100 stocks is an excellent way to target reliable dividends over time.
During 2024, UK blue-chip shares paid out £78.5bn in ordinary dividends in 2024, according to AJ Bell. That worked out at a fatty £1.5bn a week on average, a number unmatched anywhere else in the world.
Several companies, including HSBC (LSE:HSBA) and Admiral, also paid out special dividends.
3 FTSE dividend stars
AJ Bell’s boffins expect cumulative ordinary dividends to rise again in 2025. A windfall of £80.4bn is predicted, moving closer to 2018’s record high of £85.2bn. But there are some caveats, with far fewer special dividends being anticipated.
The broker has also trimmed its dividend estimates, down from £83bn tipped at the start of the year. Profits forecasts are beginning to soften across the FTSE 100 index. With threats like trade wars, rising inflation, and severe geopolitical uncertainty, investors need to think carefully when choosing dividend shares.
With this in mind, here are three high-yielding dividend stocks I think demand a close look.
Dividend grower
Defence stocks like BAE Systems could be a great low-risk option to consider in today’s climate.
They are natural reliable dividend payers across the economic cycle, reflecting their non-cyclical operations. The sector outlook is especially strong given geopolitical stresses that are boosting defence spending.
BAE has raised annual dividends every year since 2012. Boosted by a 2% rise in operating profit, it raised this year’s interim dividend 9% to 13.5p per share.
City analysts expect BAE’s dividends to keep rising sharply through to 2027. They expect annual yields to rise steadily from 1.8% this year through to 2% and then 2.3%. It’s a top dividend contender despite supply chain pressures.
8%+ dividend yields
M&G also has a long record of unbroken dividend growth dating back to its IPO in 2019. Like the BAE, forecasters are expecting this strong trend to continue over the next few years as well.
Dividend yields expected to be an enormous 8.1% for this year, and 8.4% and 8.7% for 2026 and 2027, respectively. These figures tower above the broader FTSE 100 average of 3.1%.
Earnings at M&G are highly sensitive to interest rates and the struggling economy. The company has a strong balance sheet, though, which should support near-term rewards. Its Solvency II capital ratio was a market-leading 230% as of June.
A stock I own
Banking giant HSBC paid a special dividend in 2024 as it returned cash from asset sales to investors. The lack of similar action this year means the total dividend is on course to fall.
Yet, ordinary dividends are expected to keep creeping higher, supported by the bank’s impressive CET1 capital ratio. At 14.6%, as of the mid-point of 2025, it remained above a target range of 14% to 14.5%.
This underpins dividends that are predicted to yield 5.2% for this year, 5.5% for 2026, and 6% for the year after.
HSBC’s a FTSE 100 dividend share I hold in my own portfolio. Competition is intense across its territories. Driven by booming emerging markets, I’m confident the passive income it delivers will grow strongly over time.
This story originally appeared on Motley Fool
