Top FTSE 100 dividend stocks: Imperial Brands and GSK

In today’s tumultuous markets, investing in mature and stable companies that pay out dividends can be a good way to weather volatility. Imperial Brands, GlaxoSmithKline and British American Tobacco all top the list as the highest paying dividends FTSE 100 stocks as of late September. But market research suggests that many more companies are poised to increase their dividends in the second half of 2022.

The latest Morningstar analysis of FTSE 100 stocks’ dividend payments shows that Imperial Brands [IMB.L], GlaxoSmithKline [GSK.L], British American Tobacco [BATS.L], BT [BT-A.L] and Schroders [SDR.L] are the top five paying companies as of 29 September.

According to the latest data, there have been some changes to the top 27 highest dividend paying companies, with abrdn [ABRDN], Hikma Pharmaceuticals [HIK] and Howden Joinery Group [HWDN] joining the list this month.

As the UK stock market approaches earnings season, the financial services research and data platform is expecting a flurry of upcoming dividend announcements. It also anticipates that a number of FTSE 100 constituents are poised to grow their dividend payouts in the second half of the year.

Imperial Brands takes the lead in dividend payments

At the top of the list is Imperial Brands, which will report its annual earnings for the 12 months to the end of September later this month. The tobacco firm is expected to report a dividend yield of 7.47%, according to Yahoo Finance. The company paid out 42.54p in the six months to the end of March, up a marginal 1% from the 42.12p pay out in the first half of fiscal 2021. This is line with the group’s “progressive” dividend policy.

Despite the tobacco firm reporting a 26.6% decline in operating profits in the first half of the year, overseas markets are showing signs of promise with revenue from next-generation products in Europe up 39.5% year-over-year. Strength in international expansion of its heated tobacco and vape offerings is likely to be key to Imperial Brands maintaining future payouts, with trials and pilots of these products currently underway throughout Europe and the US.

GlaxoSmithKline ups dividend but pares back forecasts

As of 29 September, Yahoo Finance data shows that pharmaceutical company GlaxoSmithKline has an expected dividend yield of 6.57% at 0.86p. In its second-quarter earnings in July, it reiterated that it expected to pay out a total of 61.25p per share this fiscal year. However, it has warned that 2023’s dividend payout will be lower at 45p per share.

The company completed its demerger with multinational consumer healthcare company Haleon [HLN.L] in July, after which it consolidated ordinary shares to maintain share price stability. For every five shares already held, shareholders were offered four new ordinary shares. GSK also reported total sales of £6.9bn.  

Upcoming dividends to watch: WPP, Unilever and Shell

Rounding up the top five paying dividend stocks on the FTSE 100 is BT with an expected yield of 6.13% and British American Tobacco, which has a robust dividend of 6.49%.

Outside of the list is advertising firm WPP [WPP.L], which is expected to deliver a yield of 4.44%. It declared an interim dividend of 15p, up 20% year-on-year from 12.5p in H1 2021. This is being supported by a year-on-year revenue increase of 10.2%.

Consumer goods giant Unilever [ULVR.L] is also forecast to deliver a yield of 3.58% in 2022. While it may not be the biggest payout, the yield over the previous five years has remained steady – between 3% and 4%.

Meanwhile, Shell [SHEL.L] has announced a second-quarter dividend of $0.25 in July, taking the total payout for the first half of 2022 to $0.50. According to Yahoo Finance, its forward yield is 3.90%.

Lloyds mortgage woes could dent dividend

Another standout dividend stock is Lloyds Banking Group [LLOY.L]. Rising interest rates are generally good news for banks’ profits, which has helped it to post an expectant dividend yield of 4.44% as of 29 September. In its half-year results released at the end of July, the banking group declared an interim dividend of 0.80p, a 19.4% increase on the 0.67p paid out in the first half of 2021. The annual dividend yield for 2021 was 4.20%.  

However, the UK government’s recent tax plans have led to Lloyds temporarily withdrawing some mortgage products due to recent market volatility. Home loans are a critical part of the lender’s business, however, so if they maintain this lending position, it could weigh on Lloyds’ profits and, potentially, the annual dividend yield.