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FTSE 100 dividend earnings shares are my first port of name when searching for shares in a inventory market dip. That’s as a result of when share costs fall, it provides me a chance to lock in a better dividend yield.
The UK’s blue-chip index has slipped in current days, and that’s pushed up the yields on quite a few dividend shares. Listed below are two for which that’s the case proper now.
Aviva shares now yield extra
For me, Aviva (LSE: AV) is ‘the one which acquired away’. I shunned the FTSE 100 insurer in favour of rival Authorized & Common Group, however backed the mistaken horse.
The Aviva share value is up 25% within the final 12 months, and nearly 140% over 5 years, plus buyers could have acquired some wholesome dividends on prime.
CEO Amanda Blanc has pushed by way of the long-awaited turnaround, streamlining the enterprise and sharpening its focus.
On 14 August, Aviva shares hit their highest degree since 2007 after it posted a 22% rise in half-year working revenue to £1.07bn. Buyers are additionally optimistic about its £3.7bn Direct Line acquisition, which is able to cement its share of the final insurance coverage market.
But I’ve held again, cautious of a share value that now trades on a price-to-earnings ratio of 27, which suggests the slightest earnings disappointment could also be punished. Insurance coverage is a mature and aggressive market, and rivals will proceed to snap at its heels.
Nonetheless, the Aviva value has now dropped 7% in per week, which presents buyers a decrease entry level. That’s pushed the trailing dividend yield again as much as a juicy 5.75%. After all, a inventory market sell-off this autumn may drive the share value decrease, however I don’t know if we’ll get one. I nonetheless assume it’s value contemplating right now.
Schroders inventory scares me
There’s extra to life than a excessive yield. In any other case I’d have purchased privately run FTSE 100 funding supervisor Schroders yonks in the past. I’m glad I didn’t although. Its shares are down 25% over 5 years — and 10 years too.
They’ve edged up a modest 6% within the final 12 months, helped by an 8% rise in first-half gross inflows to £68.2bn. However they’ve been knocked again within the final week, falling 7%.
With a P/E ratio of 13.7, the shares look respectable worth. Then again, they’ve seemed low-cost for years.
The trailing dividend yield of 5.97% tempts. The board has an honest file of accelerating dividends, which have compounded at a median price of 9.37% during the last 15 years. It hasn’t lower shareholder funds this millennium, though it has frozen them on 9 events – together with in each 2023 and 2024.
Schroders is battling to reshape itself. It’s blue-blood credentials simply don’t have the identical traction in a world of passive index monitoring and lively DIY buying and selling.
Dividends however the place’s the expansion?
Administration has been slashing working bills and promoting off “sub-scale companies”, because it seems to be so as to add self-discipline and focus, nevertheless it may take time for its transformation programme to bear fruit.
The Schroders share value didn’t make hay whereas the solar was shining on the inventory market, so buyers needs to be cautious as autumn storm clouds seem like gathering.
Aviva has sorted itself out, and that’s the one to think about. However that’s solely my opinion. Buyers ought to take their very own view.
