The UK stock market has been rising, and that means yields from the top dividend stocks have been falling. But I still see three Footsie companies with yields above 8%. Should we be considering them now, in case they rise and further erode their big yields?
Price up, yield down
Phoenix Group Holdings (LSE: PHNX) held the FTSE 100 dividend top spot earlier in the year. It’s fallen to third now the share price has risen by 25% since the start of 2025. But we’re still looking at a nice fat 8.6% forecast yield.
I think the main risk for Phoenix is that it invests in closed life and pension funds, and the supply of those is drying up. The board intends to widen its business, but that means it won’t be the same company it is now.
With full-year results in March, Phoenix reported operating cash generation of £1.4bn. That’s two years earlier then the 2026 target it had set.
That boosts my confidence in the dividend, although it can be a cyclical business. And those longer-term concerns are still there.
Long-term favourite
Legal & General (LSE: LGEN) takes second spot with a forecast 8.7% dividend yield. It’s in the same financial sector as Phoenix, and I’d be wary of buying them both unless I already had some wide diversification. But it’s one I’ve held in the past, and I may well buy it again in the future.
Legal & General also posted full-year results in March, writing of “our ability to generate sustainable growth in our core businesses.” The company also stressed its “plan to return over £5 billion over the next three years, through dividends and buybacks.”
Again there’s cyclical risk here, and falling interest rates could slow profits. But this is definitely a consideration for my next buy. In fact, if I didn’t already hold Aviva shares I’d probably have already bought some Legal & General.
Buy the market?
M&G (LSE: MNG) currently offers the biggest forecast dividend yield on the FTSE 100, at 9.0%. It’s in a related business to the others, but focuses on savings and asset management. It doesn’t have the insurance exposure since it was spun off from Prudential in 2019.
And it’s another that was upbeat about its dividend prospects at FY time, again in March.
CEO Andrea Rossi said: “Given our confidence in the outlook of M&G, I am delighted to announce that today we are moving to a progressive dividend policy, starting with a 2% increase for the 2024 total dividend per share.”
My main concern is that we’re not looking at much in the way of dividend cover, and growth forecasts are fairly modest.
But these big yields make me hopeful of further share price rises to come from all three of these top FTSE 100 dividend stocks. And I reckon investors who can handle the short-term volatility that I expect might do well to consider them. I know I am.
