I like to stay on top of my stock market investments. This means that if there are big changes in any industry or companies, I would ideally like to rethink the time period for which I would hold the stock. But there is one industry that I can be pretty sure will be stable in the long run. And that is insurance.
That is a big reason for me to consider buying FTSE 100 insurance stocks today. Moreover, they also offer relatively high dividend yields. Like the life insurer Legal & General, which has a current dividend yield of 6.3%. Similarly Aviva, with 5.4%, and the non-life insurance provider Admiral, with 5%.
The advantage with insurers
I concede that these yields are nowhere near the highest available among the FTSE 100. There are at least three stocks that offer 10%+ dividend yields. The catch is, that all three of them are commodity stocks. The segment can see some wild swings, being cyclical in nature. And the purpose of this article is to talk about stocks that offer me a good dividend yield but that I do not have to check on for any changes in their circumstances that may change their dividends.
From what I have assessed, insurers are a good next bet. Their past yields give me confidence that their dividends will stay in place. Also, considering that life insurance in particular is only going to be more in demand in countries with ageing populations, like the UK going forward, I reckon they can continue to do well as well.
Mixed share price gains
I also like the fact that they offer capital gains. Both Legal & General and Aviva, for example, have seen over 40% increases in their share prices over the past year. The Admiral share price has risen the least, around 9%, but even this is better than no change or worse, a decline in share price. I would take the increases over the past year with a pinch of salt though.
The reason being that there was a huge base effect at play last year at this time. Vaccines had not been developed yet, and the stock markets were still languishing. So, many shares’ prices were still quite low. And insurers are no exception to that. If instead I look at share prices over the past five-year period, I find different trends. Admiral has seen the biggest increase, with a share price increase of over 55%, followed by Legal & General at 33%. Aviva, on the other hand, has declined by some 11%.
What I’d do about these high dividend yield stocks
This indicates that there are both merits and demerits to the stocks. On the whole though, I am most inclined towards Legal & General. It has the highest dividend yield at present and its share price has also increased over time, though not always consistently. I will buy the stock when next adding to my income investments.
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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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