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When I first got into investing 20 years ago, I didn't pay much attention to FTSE 100 dividend stocks. In fact, I didn't really know how dividends worked or even if I could keep them.
The only thing I cared about was the growth of the stock price. So I ended up with a bunch of once-great stocks that had caught my eye for whatever reason. I have learned a lot since then.
I still buy growth stocks. In 2024, enjoyed stellar returns from private equity specialist Group 3i, FTSE 250 insurer Group onlyand engineer Costain Group. In 12 months, its shares are up a whopping 65.72%, 93.07%, and 60.94%, respectively.
<h2 class="wp-block-heading" id="h-i-don-t-just-buy-growth-stocks“>I don't just buy growth stocks
Inevitably, I have had my share of losers too. Attempts to catch falling knives. Aston Martin, Ocado Groupand Burberry Cluster They all turned out to be reckless.
Fortunately, I'm still ahead overall and, better still, having a margin of FTSE 100 dividend stocks has helped keep things going.
Today, the FTSE 100 financial sector is a rich source of dividends. I hold Legal and General Group, M&Gand Phoenix group holdings.
You have to believe that their final returns are 8.51%, 9.74% and 10.05%, respectively. They destroy the performance of any savings account.
Unfortunately, its shares have faltered over the past 12 months. L&G is up a modest 5%, M&G is down 2.46% and Phoenix is up 10.7%. This has been a difficult year for the financial sector, due to choppy stock markets and rigid interest rates. However, I still have my dividends (and yes, I can keep them).
Investors can still earn up to 5% annually in cash or bonds without putting their capital at risk. Once interest rates fall, savings rates and bond yields will follow, but not dividends. Hopefully, they will increase, as companies increase their profits and share the spoils with investors. As with investments, nothing is guaranteed.
My Taylor Wimpey shares have taken a beating
I closely follow one holding in the portfolio, the home builder. Taylor Wimpey (LSE: TW). Just a couple of months ago, it had a 12-month total return of around 50%, including reinvested dividends. Not anymore.
Taylor Wimpey's share price has fallen 19.75% in the last three months, as hopes of interest rate cuts fade and mortgage rates rise. In a further blow, national insurance and minimum wage increases next April will increase recruitment costs and squeeze the group's margins. In one year, the stock is down 3.61%.
However, I think Taylor Wimpey's sell-off has been overblown. This morning we learned that house prices rose for the fifth consecutive month in November to a record £298,083, according to Halifax. They have increased 4.8% during the year.
If interest rates fall next year, Taylor Wimpey shares could rebound. Either way, I will still receive my dividends. The final yield is now an extraordinary 7.44%. It appears reliable, given the company's strong balance sheet.
Most stocks go through good times and bad times. The appeal of dividend stocks is that the income should hopefully come everywhere. That's why I'm basing my retirement on FTSE 100 dividend heroes like Taylor Wimpey. Plus some growth stocks, of course.
