Are these the best FTSE 100 dividend stocks to watch in December 2025?

The FTSE 100 has had a great year, outperforming the S&P 500 for the first time since 2016 and reaching fresh record highs with impressive regularity. While its march to 10,000 was interrupted in November with a pullback of just over 4%, the uptrend remains intact.

For once, the absence of high-growth tech stocks has proven to be a boon, as the index provides some shelter for investors looking to ease back on allocations to US stocks that are regarded as being expensive on historical measures.

FTSE 100 macroeconomics

The FTSE 100 continues to be far more of a global index than one that tracks the UK economy. Without racy tech stocks in it, the index trades at a lower valuation, but commands a higher dividend yield, than its US cousin. 

Of course the index is not immune in the case of a broader selloff such as we saw in November. But this can offer the chance to seek out companies with solid dividend prospects that have seen losses in their share price. 

Remember that dividends are subject to change, and shares should not be purchased solely for the dividend on offer. Ideally dividend analysis should be combined with other fundamentals to properly assess the outlook for the underlying business.

Best FTSE 100 dividend shares to watch

These shares are the highest yielding on the index, with a dividend cover ratio of 1 or higher as of December 2025. Remember: they may not be the best investments, and the dividends and capital itself are not guaranteed.

Melrose Industries (MRO)

Melrose Industries is a UK-based industrial turnaround specialist known for its “buy, improve, sell” model. The company acquires underperforming manufacturing businesses, restructures them to enhance operational efficiency and profitability, and ultimately divests them to realise value for shareholders. Its current dividend yield of 9.3% and dividend cover of 1 indicate a high distribution relative to earnings, suggesting an income-focused proposition but with limited headroom should profits come under pressure.

Melrose’s portfolio has historically included notable engineering assets, especially within aerospace and industrial components. The group has benefited from the ongoing recovery in global aerospace markets, where demand for parts and maintenance has been rising. Its strategy relies heavily on disciplined cost control, operational improvement programmes and selective reinvestment.

While the high yield may appeal to investors, the low cover highlights reliance on stable cash flows and successful execution of operational improvements to sustain distributions over time.

InterContinental Hotels (IHG)

InterContinental Hotels Group operates one of the world’s largest portfolios of hotel brands, including InterContinental, Holiday Inn, Kimpton and Crowne Plaza. The business is primarily asset-light, generating revenue from franchise fees, management contracts and loyalty programmes rather than owning hotel real estate. IHG’s dividend yield of 5.2% and dividend cover of 1.4 reflect a balanced distribution policy supported by robust cash generation.

Demand has been recovering across key markets such as the US, Europe and Asia as leisure and business travel normalises following several years of volatility. IHG continues to focus on expanding its brand portfolio, enhancing loyalty offerings and growing its pipeline of new openings. The company emphasises capital-light growth, enabling high returns on invested capital and consistent shareholder distributions.

Risks include economic slowdowns that could curb travel demand, regional geopolitical disruptions and competition from alternative accommodation platforms, but IHG’s global scale and strong brand recognition provide resilience.

St James’s Place (STJ)

St James's Place is a leading UK wealth management firm providing financial advice, investment solutions and retirement planning services. Operating through a nationwide partnership of advisers, the company serves affluent individuals and families seeking long-term financial guidance. It offers a range of investment funds managed by external asset managers and earns fees based on assets under management.

The company’s dividend yield of 8.8% with a cover of 1.4 signals a relatively high distribution backed by operating cash flows. However, recent years have brought increased regulatory scrutiny across the wealth advice sector, including tighter oversight of client charging structures and value assessments.

These pressures have influenced sentiment towards the business, although SJP continues to report resilient net inflows and strong client retention. The firm’s long-term prospects depend on maintaining adviser quality, enhancing transparency and adapting its fee model while preserving its competitive position within the expanding UK wealth market.

Prudential (PRU)

Prudential is an international insurance and investment group focused primarily on high-growth Asian and African markets. Following the demergers of M&G and Jackson, the company has transformed into a business centred on life insurance, health products and asset accumulation solutions across markets such as China, Hong Kong, Singapore and sub-Saharan Africa. Its business model aims to capture rising demand for protection and savings products driven by demographic expansion and growing middle-class wealth.

Prudential’s dividend yield of 6.5% and cover of 1.7 reflect a solid balance between cash returns and reinvestment capacity. The company emphasises capital-light distribution, including agency and bancassurance partnerships, to accelerate market penetration. Regulatory regimes and currency fluctuations create variability in reported earnings, but underlying structural growth trends remain supportive.

Prudential’s performance is closely tied to economic conditions in its core Asian markets and its ability to scale digital distribution and product innovation.

3i Group (III)

3i Group is a London-listed private equity and infrastructure investment firm with a long track record of backing mid-market businesses across Europe and North America. Notable portfolio companies include Action, the fast-growing European discount retailer that has been a major driver of valuation gains in recent years.

3i combines active portfolio management, operational improvement initiatives and strategic support to drive long-term growth in its investments. Its infrastructure division also provides exposure to regulated and essential service assets. The dividend yield of 9.2% with a cover of 2.3 indicates both attractive income and strong headroom supported by robust net asset value growth and consistent cash realisations.

Performance is influenced by market conditions, valuation environments and the operational trajectory of portfolio companies, but 3i’s disciplined approach and diversified holdings offer resilience. The firm remains well positioned to pursue new opportunities while continuing to return capital to shareholders.

How to invest or trade in FTSE 100 dividend stocks

1. Learn more about FTSE 100 dividend stocks
2. Decide whether you want to trade or invest
3. Open an account 
4. Search for your chosen stock on our web platform or app
5. Make your investment or trade

When you invest in a share, you buy it outright with the view that it’ll increase in value over time.

Trading takes a more short-term view where you look to take advantage of smaller market movements. It involves leverage, which allows you to take a position that’s larger than your initial deposit. This means market movements are magnified, and you could gain or lose money faster than expected.

For example, if you trade with 5:1 leverage, you could place a £1000 deposit and manage a £5000 position. A 10% increase or decrease in the market could result in 50% profit or loss on your initial margin.

Negative balance protection will prevent you from losing more than your initial deposit, but market movements can be fast and unpredictable, and you could lose your full deposit.