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Dividend shares can be a great choice for investors looking to try and earn extra income from their excess cash. But they can be a bit less exciting than growth stocks.
This, however, doesn’t have to be the case. The FTSE 100 has some stocks that can give income investors all the excitement they need – but maybe more than they might want.
FTSE 100 dividends
Right now, the five highest-yielding dividend stocks in the FTSE 100 are the following:
| Stock | Dividend Yield |
|---|---|
| WPP | 11.06% |
| Legal & General | 9.04% |
| Phoenix Group | 8.21% |
| M&G (LSE:MNG) | 7.53% |
| Mondi | 7.37% |
High yields, however, don’t always mean high returns. Despite the dividends, investors who bought shares in WPP or Mondi five years ago are still down on their investments.
That leaves Legal & General, Phoenix Group, and M&G. These stocks have worked for investors since 2020, but the one that stands out is M&G.
After largely trading sideways since 2020, M&G’s share price has climbed 48% since April. But is this a new beginning for investors, or a case of what goes up must come down?
Profitability
M&G’s share price has been boosted by some strong profit growth recently. The firm is targeting 5% annual growth in operating profits and it has made a good start.
Pre-tax profits went from a loss in the first half of 2024 to a £248m gain in 2025. And this puts the company in a stronger position in terms of its Solvency II ratio.
While some of this has been the result of strategic partnerships, cost-cutting has been a big part of M&G’s success. But I’m slightly sceptical of this as a long-term growth strategy.
No business can cut costs indefinitely. But a 7.5% dividend yield means investors might think the stock could be a very good investment even without much in the way of growth.
Risks
One of the main reasons M&G comes with such a high dividend yield is that it’s subject to a number of risks. And these aren’t straightforward for investors to figure out.
IFRS 17 mismatches are one example. These happen when something (for example, a change in interest rates) causes the firm’s assets and liabilities to move asymmetrically.
These can boost profits – and M&G notes this has happened recently – but they can also go the other way. And there isn’t much the company can do to eliminate it.
This creates a risk for shareholders. And it means that owning the stock is unlikely to be entirely smooth, no matter how hard the company tries to offset these risks.
Boring?
None of the FTSE 100’s top-yielding dividend stocks is in a dynamic growth industry like artificial intelligence or anti-obesity medication. But that doesn’t mean they’re boring.
M&G shareholders – for example – might find their profits fluctuate more than most due to things beyond the firm’s control. That doesn’t exactly sound boring to me.
Whether it’s the kind of excitement investors want, however, is another question. A 7.5% dividend yield looks attractive, but I’ve got my passive income sights set elsewhere.
