Yields above 5%! Here are my 2 favourite FTSE 100 dividend stocks 

Nearly every FTSE 100 stock offers a dividend (even if it’s not guaranteed to be paid). That’s different from the US, where many huge tech companies don’t pay one at all. 

Given all this choice, it can be hard to pick a single favourite. Instead then, here are my two favourite Footsie income stocks today — both offering yields above 5%. 

Insurance giant 

After its recent acquisition of Direct Line, I think it’s safe to call Aviva (LSE:AV.) an insurance giant. Together, they serve over 21m UK customers, or four in 10 adults.

The stock has been on a tear this year, rising 35%. Despite this, it still offers an enticing 6.4% forward dividend yield. 

For Q3, the insurer posted strong results again. General insurance premiums rose 12% to £10bn, while £8.3bn in net flows were secured in its Wealth business. And Aviva now expects £225m in cost synergies from the Direct Line acquisition, nearly twice the original estimate.

Looking ahead, management sees operating earnings per share (EPS) growing at a compound rate of 11% between 2025 and 2028. So there’s a lot to be positive about with this business right now.

But what might derail the progress? Well, an economic downturn could force customers to rethink some of their policies. And with the Office for Budget Responsibility (OBR) downgrading its medium-term growth forecasts for the UK economy, this can’t be ruled out.

As a shareholder though, I’m bullish. From 2026 onwards, Aviva is guiding for a mid-single-digit increase in the dividend. Given that 75% of the business is expected to be capital-light by the end of 2028, I think the longer-term dividend and share buyback prospects look great. 

In my opinion, Aviva remains a top FTSE 100 dividend stock to consider.

Asia-focused lender 

With a meaty market cap of £179bn, there can be no debate over whether HSBC (LSE:HSBA) is a giant. It’s the FTSE 100’s second-largest firm and Europe’s biggest bank in terms of assets. 

However, the lending Leviathan has its eyes set firmly on the growth markets of Asia. And this strategy is starting to bear fruit, with Q3 income from its wealth division surging 30% to $2.7bn. 

Over the medium term, HSBC expects double-digit percentage annual growth in fee and other income from its wealth unit. And with Asia set to add 50m+ new millionaires by 2030, and account for one in four of the world’s ultra-high-net-worth individuals, clearly the growth opportunity is substantial. 

As for risks, the bank regularly sets aside provisions for various things, ranging from China’s property crisis to a $1.1bn hit in Q3 from the 2009 Bernard Madoff fraud case. It can be hard to know what’s coming next due to its sprawling operations.

HSBC also faces plenty of competition from Asia’s traditional banks and emerging FinTechs. 

Still, whether it’s Shanghai, Mumbai, Abu Dhabi, or Singapore, there are just so many dynamic economies across the Middle East and Asia. And HSBC has front-row exposure, which should keep profits and dividends flowing for decades. 

Speaking of which, HSBC is still sporting a decent 5.4% forward yield, despite the share price jumping 33% so far this year.

In a FTSE 100 packed with high-quality stocks, I reckon HSBC’s well worth taking seriously for its income and long-term growth potential. 

The post Yields above 5%! Here are my 2 favourite FTSE 100 dividend stocks  appeared first on The Motley Fool UK.

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HSBC Holdings is an advertising partner of Motley Fool Money. Ben McPoland has positions in Aviva Plc and HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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