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Best FTSE 100 Dividend Stock in 2024
By
Will Ellis
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Last Updated on January 3, 2024
Right now, investing in just about anything could make you feel fearsome.
The honest truth is that most economies across the world, including the ones in Australia, America, the UK, and beyond, are in a tricky situation.
They are in a spot that is leaving many afraid of what could come next. Will a powerful recession knock out businesses and hurt citizens, or will we all manage to get through record-high inflation and begin to find stability and normalization in all parts of life?
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As you can imagine, there are some people who feel that now is not the right time to invest and to put their money into any sort of market. They want to wait it out and see if things get better and then decide to spend their money then.
At the same time, there are some who feel that investing right now is the right call. In fact, some think investing now is a brilliant move. They say that if you invest now, when the economies are suffering, you stand to make good money.
They see it happening this way: you put your money into the certain right stocks now during the economic hardships. Then, when the economies bounce back – and they will – you stand to make huge financial gains because you took a risk, moved quickly, and invested when others were afraid.
If you are thinking of investing, you would be wise to take a good, solid look at dividend stocks, specifically FTSE 100 dividend stocks.
Table of Contents:
- What Is The FTSE 100
- How Is The FTSE 100 Calculated
- Why Dividend Stocks
- Best FTSE 100 Dividend Stocks
- Why Is The FTSE 100 So Important
What Is The FTSE 100? 🔎️
The FTSE 100 index measures the market valuation of the top 100 publicly traded businesses on the London Stock Exchange (LSE). Upwards of 80% of the market capitalisation of the LSE comprises the FTSE 100.
The Financial Times and the LSE, the entity’s founding parents, are represented by the abbreviation FTSE and the index is something referred to as “footsie”. The London Stock Exchange Group is now responsible for owning and operating the FTSE.
It is a significant predictor of the success of the whole market and has equal significance to the Dow Jones Industrial Average as well as the S&P 500 in the United States.
The overall market capitalisation of the component firms and the performance index are used to determine the FTSE 100’s level.
During the trading day, the value of the index fluctuates together with the market capitalization of the monitored businesses’ shares. The preceding day’s market closing is used to determine whether the FTSE 100 is quoted higher or lower.
Each trading day, starting at the market’s start at 8:00 AM and continuing until the LSE closure at 4:30 PM, it is continuously monitored. A drop in the FTSE 100 indicates a reduction in the value of the biggest UK-listed corporations. A new high for the FTSE indicates an increase in the combined value of all the indexed firms.
The FTSE 100 has been around for decades now. In fact, in 1984, the FTSE 100 was first introduced.
Ever since, its composition has altered to represent company entry and exits as well as mergers and acquisitions highlighting its role as a gauge of market activity. A business must be represented on the LSE but doesn’t have to be British to be included in the FTSE.
The worth of the pound is also important since many of the listed firms have their headquarters abroad or conduct the majority of their operations there. A corporation based in the United States would be valued more in pounds if the pound were to decline, and vice versa if it were to rise.
To make sure the FTSE 100 comprises the companies with the largest market caps, it evaluates the FTSE 100’s constituent parts every quarter.
Numerous other indexes that measure a variety of equities and financial instruments are also researched and published by FTSE. The FTSE SmallCap index, which contains the following lesser collection of companies, and the FTSE 250, which contains the 250 biggest corporations just after FTSE 100, are additional indices offered by FTSE UK. Together with the FTSE SmallCap, the FTSE All-Share is made up of the FTSE 100, FTSE 250, and the FTSE 350.
How Is The FTSE 100 Calculated? 🔢️
You may be wondering how the FTSE 100 is created, calculated, adjusted, and why it should be trusted as one of the most prominent and important economic factors in the UK, Australia, and beyond.
The basic math behind determining the FTSE 100 is rather simple. By dividing the market capitalisation of all the stocks on the London Stock Exchange into 100, the FTSE 100 is determined. The index includes the top 100 corporations by market capitalization.
The FTSE 100 gives more importance to stocks with larger market capitalisation, which has an impact on the index’s price changes. Quarterly, the market capitalization of each firm is examined, and the index is modified as appropriate.
Any company that is listed in the FTSE 100 needs to meet certain requirements. For starters, it needs to be a public limited company that is on the London Stock Exchange, and it also must be able to match the index’s limited liquidity prerequisites too.
The company in question needs to be one of the top 100 on the LSE too. This means that each of the companies on the index are considered “large cap” companies.
The FTSE 100 is then weighted by a free-floated market capitalization. This is not the same thing as a full market cap, because it is only accounting for floating stock, those that are always available to trade freely and not restricted to stocks that are closely held.
Why Dividend Stocks?
Dividend stocks may be a terrific asset for your portfolio of investments since they give investors the diversity in their portfolio collection while also collecting consistent income on their holdings. This income could be retained or returned to grow your position.
The 100 biggest firms listed on the London Stock Exchange (LSE) by market capitalisation make up the benchmark index for the UK, the FTSE 100, and numerous of these corporations pay dividends on a regular basis.
Best FTSE 100 Dividend Stocks 🔝️
1. Vodafone
Throughout the previous five years, Vodafone stock has decreased over 50% and is down about 15% year to date. Cevian Capital, historically among the top 10 shareholders and the biggest activist investor, has reduced its holding in reaction to mounting doubts about Vodafone’s ability to turn around its poor showing. However, Cevian might have leapt too soon, given that a restructure finally seems to be under way.
Yes, there has been some bad news about Vodafone recently, but those who are really paying attention see great things on the horizon, and that is why you should invest in the stock as soon as you can.
Before disclosing its half-year report soon during this year, the FTSE 100 telecoms and ISP firm is thinking of selling as much as half of its 82% share in Vantage Towers. This could allay concerns about debt and change its perception among many people, including other investors, who are currently skittish about devoting funds to Vodafone.
Additionally, the storied company is in discussions with the ownership of Three UK to merge its British businesses and become the dominant force in the UK’s mobile phone market. If regulatory obstacles can be surmounted, this might significantly improve Vodafone’s financial situation. They would merge and grow and become one of the largest mobile companies in the entire world.
Additionally, there’s the €7 billion partnership between FibreCo and Altice to take into account. The service, which will shortly be accessible to nearly 8 million German households, is intended to compete with Deutsche Telekom for control of the fibre-to-the-home broadband service.
This deal might come together assuming regulatory permission. This agreement relies on Vodafone’s considerable powerful network with Altice’s industrial knowledge and established fiber-to-the-home installation capabilities. When their powers are combined, they could dominate the market and provide this much-needed service to millions of people, boosting the price of the stock, the importance of the company, and the brightness of the future.
Even though Vodafone has a large amount of debt, its overall cash flow increased to €5.4 billion during 2021. It might therefore continue to generate adequate cash flow to keep up its respectable 7.6% dividend yield in the year ahead.
2. Barclays PLC
You have surely heard of Barclays PLC, even though you don’t live in the UK. It is a London-based provider of many different financial goods and services in the UK, Africa, America, the Middle East, Asia, and beyond.
Indeed, Barclays has now become one of the biggest financial institutions on Earth, even though it is still run out of its London headquarters.
The sheer variety of the products and goods offered by Barclays is what makes it so attractive, even now as the UK and other nations face serious economic problems and political turmoil as the hunt for a new prime minister continues.
Credit cards, wholesale banking, investment management services, and wealth management are just some of the many things that customers come to Barclays PLC for. For many, they have become the one financial institution that is used and relied upon in the UK and beyond.
The thing that makes Barclays so attractive, even now, is that they are poised for a great surge in value in the months and years ahead. When the economies of the world rebound and stabilise, Barclays could make a huge windfall of monetary gain. That is because the company is invested in so many different countries.
When each of these countries begins to have a healthy economy again, the money that will flow into Barclays will surge and those who hold stocks in the company are bound to benefit from that.
Back in August, Barclays PLC revealed a $0.105 per share semi-annual dividend. This was paid out to the shareholders just one month later in September. In October, Barclays delivered a dividend yield of over 6.40%. These are substantial gains for shareholders.
Barclays is known to hold many different hedge fund stakes and most recently it was estimated that the value of these funds rate at about $152 million, which is an increase of more than $30 million from just the previous quarter that came before.
The fact of the matter is that banks will always be needed in one way or another, through good and bad economic times. In the months ahead, Barclays will rebound as other countries and their economies do and those who have invested in this financial institution will prosper.
3. Rio Tinto
As recently as summer 2022, Rio Tinto shares were trading above 6,000p, but they have subsequently dropped to 4,700p.
With a dividend yield of over 11%, this company has been impacted by the exact same downturn in the market as BHP and other ASX 200 firms.
Rio Tinto is a major iron ore producer and supplier on a worldwide scale, and the cost of iron has indeed been falling ever since it spiked earlier this year amid rising concerns about a Chinese economic downturn and a broader worldwide recession.
Iron ore mines, separate port facilities, and a sizable rail network are all part of Rio Tinto Iron Ore’s Pilbara enterprise. Steel is produced primarily from iron ore for use in Chinese industries. They have a lot of irons in the fire, so to speak. Right now, that leaves them vulnerable to the downturn of the economy in China and beyond. But it also means that they are prepared for a huge burst in productivity and financial gain in the months ahead.
It must be noted that some economists have cautioned that the mood is still shaky for the majority of metals and that construction is now the most probable industry to enhance the need for steel and iron ore, but this sector’s influence is decreasing. Therefore, the companies that most need metals are the ones that are currently pulling their purse strings tight. At least for now.
Prices of other important metals mined by Rio, like copper, aluminum, and zinc, have also declined from their peak levels in 2022, raising concerns about potential additional declines in the event that the global economy enters a recession.
However, despite the dangers, a double-digit yield and an already-revised share price would make Rio Tinto shares a smart buy at this point.
The company knows that it is not as strong as it’s ever been but it’s also making adjustments to its shares and price points to combat this and stay relevant – and attractive – for potential buyers.
In the months ahead, as the recession likely recedes and infrastructure building begins again, you can expect to see Rio Tinto benefit from that.
4. Pearson PLC
The company Pearson PLC has been around since the year 1844, which means that it has survived many good and bad economic turns and is still around to this day.
That alone is a sign that this is a company you should consider when investing in FTSE 100 dividend stocks.
The company is headquartered in London and provides all sorts of goods that are always going to be needed – those related to the educational process. They offer books, services, assessments, and virtual learning for schools through the UK, Asia, Europe, the United States, and more.
The thing that makes Pearson PLC so attractive is that it is looking to branch out even more and become a more prominent voice and presence in the educational industry. The CEO of the company recently said that they plan to be a “one-top-shop” for all things related to education.
This is especially attractive for potential investors because so many schools will be relying on virtual learning experiences in the years ahead. Although the COVID pandemic is coming to an end, schools will still be using digital services a lot more than they did in the past.
Pearson PLC is ready to capitalize on this and become even better at what it does. Because of this, the valued price of Pearson PLC was raised by Deutsche Bank analysts from 900 GBP to 1,140 GBP, a sizable increase.
5. British American Tobacco
There are plenty of people who have a hard time supporting tobacco because of ethical issues. There is no shame in that, and that might mean that this next company will not be possible for you to invest in.
But if you are able to look past that and still put your money into such a business, British American Tobacco could be a great investment for you on the FTSE 1000.
The fact that the current dividend yield of British American Tobacco is 7.5% is the first reason why you should look twice at this stock and put your money into it. It is one of the highest yielding FTSE 100 dividend stocks on the market today.
British American Tobacco is a wide-ranging business that now operates in more than 180 countries throughout the world, offering a wide variety of cigarettes and next-generation products related to tobacco. Smokers are relying more and more on digital pens to smoke and British American Tobacco has been investing in and creating and selling those, capitalising on a growing market that is always changing.
The truth is that tobacco companies are almost always successful, through good times and bad, through strict and relaxed regulations. In fact, since the year 2000, British American Tobacco has raised its dividend payments every single year.
This all means that even during the Great Recession of the late 2000s, the COVID pandemic, and multiple other economic earthquakes throughout the globe, British American Tobacco has not only survived but its value has grown again and again.
This proves that no matter what is currently going on in the world, British American Tobacco is still poised to be successful and to pay back those who invest in it.
The number of smokers in the world has decreased over the years but British American Tobacco has still found ways to make sales and provide goods to people who are partaking in smoking and tobacco.
This sort of ingenuity means that British American Tobacco will still be making money in the months and years ahead. Even as the market for tobacco products has become smaller and smaller, this company has adapted, added new products, and was able to make sales.
Why Is The FTSE 100 So Important? 🤔️
The FTSE 100 is now held in very high regard among investors throughout the world, not just in the UK. This is because the FTSE 100 is now the primary way that people judge the health of the UK market. That means that it is a good indicator of the state of the United Kingdom’s economy as a whole.
The FTSE is affected by external events, such as the COVID pandemic, elections, recessions, global war conflicts, and more. Therefore, it is also a good way to tell how the world is doing beyond just the economic conditions.
There are certain things that prevent the FTSE 100 from being a perfect indicator and gauge of the UK’s economy. Because so many of the companies are operating in more than just the UK, they make their profits elsewhere and the conversion between the money they make overseas to what they hold at home in the UK isn’t always equal.
However, the FTSE 100 and the dividend stocks within it are a great way for you to make extra money if you invest wisely. You need to ensure that you only select the stocks that are going to survive and thrive during all economic conditions. In the good times and the bad, the stocks listed above have the potential to do that.
Investing right now is a tricky proposition and it has to be done carefully and smartly. By choosing the right FTSE 100 dividend stocks, you can boost your portfolio’s strength and its variety and the financial benefits it can bring you.
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