2 dividend stocks that are destroying the rest of the FTSE 100

When it comes to great dividend stocks, there are two main factors I consider. The obvious one is income generation, usually seen by dividend yield. The second factor is the performance of the stock price over a period of time. Here are two stocks that I have observed that are above average when compared to the main index.

Ensuring profitability

First, let’s establish the benchmark. The average dividend yield for the FTSE 100 is 3.55%. The index rose 8.61% compared to last year. So ideally, I need to select stocks that are ahead of these two metrics. Otherwise, it is better to invest in a tracker fund that distributes income.

One stock that is well ahead of this is Aviva (LSE:AV). The insurance and wealth management provider has a current yield of 7.13%, with shares also up 17% over the past year.

In the report for the first half of 2024, it recorded double-digit percentage growth in operating profit, cash remittances and capital generation compared to the first half of 2023. The CEO commented that “Sales increased. Operating profit increased. The dividend increased. Our plan to offer more to customers and shareholders is really working
good”.

Given the nature of the insurance and premiums issued, the business has solid cash generation. This makes it attractive to dividend hunters. I don’t see that changing anytime soon, which means it’s one of the top stocks on my radar to consider adding to my portfolio.

One concern is that this could be undone through natural disasters. It offers home and travel insurance and therefore any form of black swan event could lead to losses for Aviva.

Moving with momentum

Another option I’m thinking about is BT Group (LSE:BT.A). Although it has a lower yield than Aviva, at 5.53%, the share is up almost 22% in the last year.

The share price rose again in May after annual results highlighted that the business had passed peak capital expenditure in relation to the rollout of fiber broadband. In my view, this means that dividend payments will be more sustainable in the future, as investment elsewhere is not taking up all the free cash.

Furthermore, BT was able to achieve its £3 billion cost and service transformation program a year ahead of schedule. Again, this means the company will be more agile and efficient in the future, reducing potential cash waste.

Some people may be concerned about the growing stake that billionaire Carlos Slim has in the company. His family business now owns 4.3% of BT Group, but his exact reasons have not been revealed. It may not be a cause for concern, but some clarity would be helpful.

Overall, I like both stocks and will probably add them to my investment pot later this month.