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Part of my investing routine at the beginning of each month is to spend time looking for new dividend stocks to buy. I’ve been looking for the FTSE 100 and settled on a couple of income stocks that offer higher-than-index payouts.
The two companies are open (LSE: ABDN) and fan (LSE:AV.), which have dividend yields of 6.4% and 6.6%, respectively.
Let’s explore each other’s perspectives in turn.
open
Abrdn’s share price has risen 16% over the past year. This Footsie company provides a range of investment services and derives most of its income from the UK.
First, it’s important to recognize that the investment manager ran into difficulties last year. The company’s performance in 2022 was a bit disappointing. Net operating income fell 4% to £1.5bn and underlying profit fell by almost a fifth to £263m.
However, in my opinion, volatile market conditions are largely responsible for these figures and there are reasons to be optimistic about the company’s prospects in 2023.
Last year, the company acquired Interactive Investor (ii). This enhances Abrdn’s direct-to-consumer offering in UK savings and wealth. In fact, the growth of ii looks promising.
| ii Performance metrics | Results FY22 vs. FY21 |
|---|---|
| net operating income | £176 million (+38%) |
| Adjusted operating profit | £94 million (+109%) |
| Cost/income ratio | 47% (18ppts better) |
| Customer numbers | 402,000 (fixed) |
Furthermore, I am pleased that the company has kept its annual dividend at 14.6 pence per share, suggesting that Abrdán wants to preserve its reputation as one of the UK’s top dividend stocks to buy.
That being said, the dividend coverage is not as strong as I would like, but I am hopeful that stocks could benefit from more favorable trading conditions if the macroeconomic picture starts to improve. Additionally, it is worth noting that adding shareholder value through share repurchases remains a key priority.
Overall, if I had some spare cash, I would buy Abrdn shares as the company continues to streamline its business and strengthen its customer base.
fan
Unlike Abrdn, Aviva’s share price has plunged 16% in 12 months. The multi-line insurer focuses on the British, Irish and Canadian markets.
Aviva looks like another solid dividend stock in my opinion. The company expects a payout of 32.5 pence per share this year. In addition, the company also expects to launch a new share buyback program next week to track full-year results.
The rapid growth in Aviva’s mass annuity business is encouraging. So is the company’s position as one of the largest providers of equity issues in the UK. Both of these characteristics mean that the company is well positioned to benefit from increased demand for retirement financing solutions. In this context, demographic changes resulting from the aging of the population are a long-term tailwind for Aviva’s shares.
Investing in the insurance giant is not without risk. Like most life insurers, Aviva has large liabilities on its balance sheet. When defined benefit pension schemes faced margin calls on liability-driven investment (LDI) strategies after last year’s ‘mini’ budget, the group’s capital and liquidity were put to the test. Future turbulence in the bond markets could generate more shocks.
Nonetheless, Aviva is a well-capitalized business. It showed an admirable resilience in the face of market turbulence. With diversified income streams and market-leading distributions on offer, this is another FTSE 100 dividend stock you’d buy in March with some extra cash.
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