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In 2025, income-orientated FTSE shares delivered shareholders a sack of dividends so large it would have made Santa proud.
Key industries that outperformed the broader market include banking, insurance, healthcare and energy. Lloyds and Standard Chartered stand out among the UK’s banks, while Aviva and Phoenix Group made impressive ground in insurance.
Meanwhile, income heroes such as Ashtead Group and British American Tobacco continued their decades-long unbroken track record of dividend growth.
Targeting income in 2026
Investing in high-yield dividend stocks is a popular method of earning income — and it could become even more lucrative in 2026. Interest rates are tipped to drop further, shifting focus away from bank stocks while benefiting regulated sectors like energy and utilities.
Meanwhile, insurance and wealth management companies look set to keep benefiting if a growing UK market fends off recession fears.
Together, the top-yielding dividend stocks on the FTSE 100 should continue to offer an average yield of around 7%. At that rate, an investment of £20,000 would payout annual income of £1,400. Compounded over time by reinvesting dividends, that amount could more than double in 10 years.
Contributing just £100 a month would supercharge the growth, sending it to near £60,000 and paying £4,000 in annual income.
A top stock to watch in 2026
One of the FTSE 100‘s most notable winners this year was Admiral Group (LSE: ADM). The insurer enjoyed a 90% year-on-year surge in profits before tax while its customer base grew to 11.4m. At the same time, it increased its dividends an unprecedented 86.4%, with its yield climbing to 7.5%.
If customer growth continues in 2026 while pricing holds or eases more gradually, its gearing to profitability per customer means earnings could expand faster than revenue — a classic recipe for outperformance in a recovering market.
And if the Bank of England cuts rates into 2026, Admiral’s cost of capital falls, making its heavy reliance on reinsurance and float management more favourable.
Brokers, on balance, seem optimistic too. Jefferies upgraded Admiral to a Buy in late 2025, raising its target price to 4,100p from 2,550p. Calling it a “growth compounder“, the company noted its underappreciated momentum. The average 12-month price target from other analysts is 3,600p, a 16% increase from mid-December levels.
Final thoughts
Despite a litany of macro factors putting pressure on publically-listed companies, FTSE shares outperformed expectations in 2025. With fears of a downturn fading, 2026 is in good stead to see a repeat of that performance. That’s why dividend-paying FTSE 100 stocks will remain a key part of my portfolio as the new year rolls around.
But while it remains the largest player in the UK, Admiral’s motor insurance market share has fallen 17.2% since 2021. It’s now at only 14% while Aviva and Direct Line have both crept up to around 12% each. If it fails to reverse this trend, revenue from this key market could decline in 2026.
So while not without risk, I think Admiral Group has still emerged as a top income stock for income investors to consider in 2026. And itâs not alone â the Footsie is full of shares that could benefit in 2026 from similar conditions.
The post Dividend-paying FTSE shares had a bumper 2025! What should we expect in 2026? appeared first on The Motley Fool UK.
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Mark Hartley has positions in Admiral Group Plc, Aviva Plc, British American Tobacco P.l.c., Lloyds Banking Group Plc, and Phoenix Group Plc. The Motley Fool UK has recommended Admiral Group Plc, Ashtead Group Plc, British American Tobacco P.l.c., Lloyds Banking Group Plc, and Standard Chartered Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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