5 FTSE 100 income stocks paying bumper dividends

As an old school value investor, I like to buy stocks cheap and then hold them for years and sometimes decades. And as I get older (I’m 55 this week), I tend to buy more stocks.

What are income shares?

Income stocks are stocks that I buy for their ability to consistently generate cash dividends for investors. After all, long experience has taught me that this dividend accounts for a sizeable slice of my long-term return.

However, most London-listed stocks do not pay dividends to shareholders. In many cases, these companies are making losses, or reinvesting their earnings to increase future growth. Also, future dividends are not guaranteed, so they can be cut or canceled without notice.

Therefore, it is a fun place to hunt for blue-chip income-producing stocks FTSE 100 index, where all but a few stocks pay regular dividends. Here are five Footsie stocks that all offer marketing-beating cash returns for patient investors like me.

Five FTSE 100 stocks

Currently, the FTSE 100 offers a dividend yield of around 4% per annum. But these five stocks offer higher dividend yields than the broader index. I’ll start with stock prices, then move on to stock fundamentals.

Only one of the five income stocks that gained in value over the past year was a mega-miner Rio Tinto, whose stock is up nearly 5%. The remaining four stocks have all fallen over the past 12 months, with the telecoms giant leading the way The Vodafone Group and insurers Aviva the worst hit.

Of course, a falling stock price translates into a higher dividend yield (all else being equal, that is). Here’s how these five companies generate cash:

Please note that insurance company/asset manager Aviva and M&Gthe final earnings are negative. Thus, it currently lacks the correct price-to-earnings ratio, earnings yield and dividend cover. But these figures should be restored this year, as both groups return to profitability in 2023.

Shares with both high earnings and market-beating dividend yields are really interesting to me, especially if they match the high dividend cap. For example, thanks to its impressive 15.1% yield, L&G shares offer an impressive dividend yield of 8% per annum, covered 1.9 times by earnings.

In addition, Rio Tinto shares offer a dividend yield of more than 7% per year, covered 1.6 times by earnings. Then again, with the global economy expected to collapse in 2023, earnings at many of these companies will stagnate this year. But as a long-term investor, I can handle the volatility of this market.

Would I buy all four of these income stocks today? My answer is no, but only because I already own four of these dividend stocks. The only thing I don’t have yet is the M&G, which is already on my list to buy when the next tax year starts on April 6th!