Are these the best FTSE 100 dividend stocks to watch in 2025?
Five FTSE 100 companies offer dividend yields above 5.7%, combining income potential with varying degrees of payout sustainability and growth prospects.
What's on this page?
Understanding dividend yields and cover ratios
When evaluating dividend stocks, two metrics stand out as essential for investors seeking income. Dividend yield shows the annual payout as a percentage of the share price, whilst dividend cover reveals how many times a company's earnings could pay that dividend.
A higher yield naturally attracts income-focused investors, but sustainability matters more than headline figures. Companies with yields exceeding 8% may signal either exceptional value or potential trouble ahead, depending on the underlying business fundamentals.
Dividend cover below 1.5x suggests limited room for error if earnings decline. Cover above 2x indicates a well-protected payout with scope for future increases. The sweet spot often lies between these extremes, balancing immediate income with long-term security.
UK investors particularly value dividends for their tax efficiency within ISAs and SIPPs. The FTSE 100 has historically offered higher yields than many international indices, making it a natural hunting ground for income-seekers looking to invest in UK stocks.
Market environment for dividend stocks in 2025
The economic backdrop for dividend stocks has shifted considerably over the past year. Interest rate cuts from the Bank of England (BoE) have made high-yielding equities more attractive compared to cash and bonds, whilst also easing financing costs for property companies and highly-geared businesses.
Inflation remains above target but trending downward, which helps companies manage costs whilst maintaining pricing power. This environment supports dividend sustainability, though pressures on consumer spending and business investment continue to weigh on certain sectors.
Global economic uncertainty persists, with trade tensions and geopolitical risks creating volatility. Defensive sectors typically fare better in such conditions, explaining why tobacco, utilities and consumer staples often dominate high-yield stock lists.
The ongoing shift in market leadership from growth to value has benefited many traditional dividend payers. Investors increasingly appreciate tangible cash returns over promises of future profits, a trend that could persist if economic growth remains subdued.
WPP leads with highest yield but tightest cover
WPP currently offers the most generous dividend yield in the FTSE 100 at 8.6%, though this comes with notable caveats. The advertising giant's dividend cover of just 1.11x leaves minimal margin for error if earnings deteriorate further.
The company has faced sustained headwinds from reduced marketing budgets among technology and consumer goods clients. Economic uncertainty typically hits advertising spending first, making WPP particularly sensitive to the business cycle. Cost reduction programmes have helped stabilise margins, but revenue growth remains elusive.
Management's commitment to maintaining the dividend reflects confidence in cash generation, yet the tight cover ratio suggests increases are unlikely in the near term. Free cash flow remains adequate to support the payout, but any significant client losses could force a reassessment.
The potential upside lies in a recovery of global advertising markets and the integration of AI-driven marketing solutions. If these trends materialise, WPP's yield could prove attractive for patient investors willing to accept the higher risk profile.
Property companies offer mid-range yields with better coverage
Land Securities and LondonMetric Property both deliver dividend yields around 6.7%, but with markedly different business models. Landsec focuses on a diversified portfolio spanning retail, offices and mixed-use developments, whilst LondonMetric concentrates on logistics and last-mile warehousing.
Landsec's dividend cover of 1.32x provides reasonable protection, supported by consistent rental collections and prudent balance sheet management. The office market remains challenging as hybrid working patterns persist, but quality retail assets and urban regeneration projects help offset valuation pressures.
LondonMetric's stronger dividend cover of 1.4x reflects its focus on structurally-supported property sectors. E-commerce growth continues to drive demand for logistics space, whilst long lease terms provide earnings visibility. The company's merger with LXI REIT earlier in 2024 broadened its asset base and tenant diversity.
Both property stocks should benefit from lower interest rates reducing financing costs. For investors considering how to trade shares in the property sector, these REITs offer compelling yields with different risk-reward profiles.
Imperial Brands combines yield with defensive characteristics
Imperial Brands stands out with a 6.3% yield backed by solid dividend cover of 1.61x. The tobacco company's dependable cash generation makes it one of the more reliable income stocks in the index, despite ongoing regulatory and ESG concerns.
Price increases across key markets have offset volume declines, a pattern that should continue given the inelastic demand for tobacco products. Disciplined cost control has freed up capital for both dividends and share buybacks, supporting the share price whilst returning cash to shareholders.
Management has simplified operations by focusing on core tobacco markets rather than aggressively pursuing next-generation products. This conservative strategy prioritises cash flow stability over growth, aligning with the needs of income-focused investors.
The company's defensive characteristics become particularly valuable during economic downturns. Whilst growth prospects remain limited, the combination of strong cash generation and reasonable valuation suggests the dividend is sustainable with scope for modest increases.
Rio Tinto rounds out the list with mining exposure
Rio Tinto delivers a 5.7% yield with comfortable dividend cover of 1.65x, offering exposure to commodities alongside income. The mining major's robust balance sheet and conservative payout policy provide ample cushion against the inevitable volatility in commodity prices.
Iron ore remains the primary profit driver, though prices have softened from their 2023 peaks. Copper and aluminium operations offer long-term growth potential tied to the energy transition, potentially supporting earnings as global decarbonisation efforts intensify.
The company's disciplined capital expenditure and focus on shareholder returns distinguish it from peers. Management has consistently prioritised cash returns over empire-building, a strategy that income investors particularly value.
For those exploring investing for beginners, Rio Tinto offers a way to gain commodity exposure whilst receiving regular income. The dividend should prove sustainable even if commodity prices remain range-bound.
Assessing risk and reward across the five stocks
These five dividend stocks represent different points on the risk spectrum. WPP offers the highest yield but requires confidence in a cyclical recovery. Imperial Brands provides defensive stability with moderate growth. Rio Tinto adds commodity exposure to a dividend portfolio.
The property stocks sit somewhere in between, with Landsec facing greater near-term challenges but LondonMetric benefiting from structural tailwinds. Dividend cover ratios tell part of the story, but broader business fundamentals and sector dynamics matter equally.
Diversification across these names could reduce concentration risk whilst maintaining a portfolio yield above 6%. However, all five stocks carry specific risks that investors must weigh against their income requirements and risk tolerance.
Understanding what the stock market can deliver in different economic scenarios helps set realistic expectations. High yields often reflect genuine risks rather than market inefficiency.
How to invest in FTSE 100 dividend shares
- Research each company thoroughly, examining recent financial results, dividend history and sector outlook to understand the sustainability of payouts
- Download the IG Invest app or open a share dealing account to access UK shares
- Search for your chosen dividend stocks using the ticker symbol or company name in the platform
- Decide whether to build a diversified dividend portfolio or focus on individual stocks based on your income needs
- Consider using an ISA wrapper to shelter dividend income from tax and maximise your after-tax returns
- Monitor dividend announcements and company results regularly to ensure your holdings remain on track to meet expectations
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
