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Dec 28

Revealed! The shares that paid the highest dividends in 2022

Reading Time: 4 mins

Everyone loves a dividend! So, with the year drawing to a close we thought we’d take a look at the FTSE 100 members with the highest dividend yields.

Keep on reading for all the details or click on a link to head straight to a section…

What are dividends?

When you buy shares in a business, you’re essentially buying a unit of ownership in that company. The idea is that your investment will be used to support the company’s growth, boosting its value.

Most for-profit organisations exist to serve the interests of shareholders. Because of this, many will reward shareholders with a dividend payment, especially during a profitable year.

Dividend payments are typically paid to shareholders in cash or in the form of additional stock which can be re-invested.

Dividends are often paid throughout the year, such as on a quarterly basis. Other companies, however, may choose to pay dividends just once or twice a year.

There are also businesses that don’t pay dividends, regardless of performance. Instead, dividend-less organisations often prefer to re-invest profits straight back into the company.

Investing in shares that pay dividends is one way to earn passive income.

decisions on dividends

The decision on dividend payments, including how frequently they’re paid, is a matter for an organisation’s board of directors. It is for this reason why some dividend hunters may look to invest in businesses where the Managing Director or CEO receives a dividend.

That’s because if the head of an organisation receives dividends, they’ve a vested interest to ensure the business shares its profits.

What is a dividend yield?

A ‘dividend yield’ refers to the percentage of dividend a business pays out to shareholders in relation to its share price.

For example, let’s say a company has a share price of 100p and it pays investors a 2p dividend per share. The organisation’s dividend yield would be 2%.

While it can be temping to invest in companies with high dividend yields it’s worth knowing that this strategy comes with a fair amount of risk. That’s because if you invest in companies with a high dividend yield  there’s a strong chance their payouts are strongly tied to performance. So, if a company has a sluggish time of it one year, investors could find themselves short-changed.

Also, a high dividend yield may indicate a firm’s share price has recently plummeted. That’s because if its share price tanks but its dividend remains the same, the company’s dividend yield will rise substantially as it’s linked to the value of its (falling) share price. In other words, while a high dividend yield may indicate a strong performance, this isn’t always the case.

Because high dividend shares aren’t the ‘be-all and end-all’, some investors prefer to invest in blue-chip companies. These typically have lower dividend yields, but their share price values are usually more stable.

which stocks paid the highest dividends in 2022?

According to DividendData, these are the five FTSE 100 companies that have had the highest dividend yields over the past 12 months. (The data is based on the current share price and total dividends declared in 2022).

1. Persimmon – 18.96%

Persimmon is one of the UK’s largest house builders. While the company has enjoyed strong growth over the past half decade or so, 2022 has been a year to forget for the company.

This year Persimmon’s share price has lost 57% of its value, and it can be argued the end of the Government’s Help to Buy scheme – plus the fact that nothing has been announced to replace it – has been a big factor in pushing down the firm’s share price. House prices are also on the way down, we are told, which probably hasn’t helped.

Despite this, Persimmon has paid its shareholders dividends this year. These payments account for 18.96% of the firm’s value. This is by far the largest dividend yield in the FTSE 100.

2. M&G – 9.86%

M&G is a London-based financial services company. While its share price has suffered over the past 12 months – falling by more than 10% – its performance has been nowhere near as bad as Persimmon.

This year, M&G has paid dividends totalling almost 10% (9.86%) of its value..

3. Rio Tinto – 9.81%

Rio Tinto is one of the world’s largest mining companies. Amid soaring demand for metals in 2022, we perhaps shouldn’t be surprised to learn its share price has climbed a hefty 15% this year.

In terms of sharing the spoils, Rio Tinto rewarded its investors with a 9.81% dividend yield this year.

4. Vodafone – 9.36%

Vodafone is one the UK’s largest phone networks. Unfortunately for its long-term investors, however, its share price has fallen a massive 27% since the year began.

Yet despite a challenging 2022 for the network provider, Vodafone has delivered its investors a 9.36% dividend yield this year.

5. Barratt Developments – 9.07%

Barratt Developments is another major UK property builder. The company has seen its share price tumble by 46% since the turn of the year, almost mirroring the performance of rival housebuilder, Persimmon.

Barratt investors have received a dividend payout totalling 9.07% of the firm’s value in 2022.

how to buy high dividend shares

As we’ve explained above, investing in companies with a high dividend yield isn’t necessarily a winning strategy.

That said, if you do want to include some high dividend shares to earn some passive income – preferably as part of a diversified portfolio – then do take a look at our comprehensive guide to buying shares. 

Don’t forget, if you want to pick and choose your own stocks, it’s probably worth holding them within tax-free wrapper. For more on this, see our article that explains how to choose the best stocks and shares ISAs.

And while we’re at it… if you’re keen to learn about investing then why not sign up to our fortnightly MoneyMagpie Investing Newsletter? It’s free and you can unsubscribe at any time.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. ISA tax treatment may change in future.

*This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.

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