The FTSE 100 is an excellent place to find top dividend stocks. It’s packed with companies whose diverse revenue streams, market-leading positions, and strong cash generation often lead to large and growing dividends over time.
Today is an especially good time to consider investing in FTSE 100 shares too. Why? Analysts think shareholder payouts will reach new highs this year, beating the £85.2bn of dividends generated in 2018.
Have £20,000 to invest in a Stocks and Shares ISA? Here’s how much passive income you could make over the next 12 months.
£88.8bn of dividends?
According to AJ Bell‘s regular ‘Dividend Dashboard’ report, total ordinary dividends from Footsie firms will come in at £88.8bn in 2026. That’s up from the £88bn analysts had tipped in March, and the £86bn at the turn of the year.
These dividend estimates mean the FTSE 100 carries a forward dividend yield of 3.4% for 2026. So if broker forecasts are accurate, a £20,000 investment in a Stocks and Shares ISA would provide £680 in dividends this year if put into an index tracker fund.
But here’s the thing: it means investors would get less in passive income today than they have typically enjoyed in the past.
Beating the FTSE 100
As AJ Bell notes:
Strong gains made by the index this decade [mean] the index has gone up faster than dividends, so the available dividend yield has contracted.
What this means is that while cash dividends have increased, investors get less back in passive income for every pound they invest in a tracker. The forward dividend yield of 3.4% today sits some way below the long-term average that’s closer to 4%.
Yet there’s a simple way investors can get around this. How? By buying individual high-yield Footsie dividend stocks instead. There are currently 36 blue-chip shares with yields above 3.4%.
A 5.6% dividend yield
Take the following FTSE 100 shares, for instance:
| Dividend stock | Forward dividend yield |
|---|---|
| Legal & General | 7.5% |
| Barratt Developments | 6.1% |
| Severn Trent | 4.2% |
| Tritax Big Box REIT | 5% |
| Investec (LSE:INVP) | 6.3% |
| Admiral Group | 4.3% |
With an average yield of 5.6%, a £20,000 ISA investment spread equally across these stocks would deliver dividends of £1,120 in 2026. Investing in a smaller pool of companies means higher risk than a tracker fund. But these six dividend stocks are in great shape to keep paying index-beating dividends in my view.
Take Investec. It’s raised dividends in 14 of the last 15 years, and offered an average 5.5% dividend yield over the past decade.
A top dividend stock
The business provides banking and wealth management services globally. And so during good times profits can soar, underpinning a subsequent sharp rise in dividends. Yet the bank doesn’t pay out an outrageous portion of its profits each year, which means its dividends are sustainable over time. Its payout ratio target is a healthy 35% to 50% of earnings per share (EPS).
The downside is that dividends can fall along with earnings during economic downturns. That remains a real risk yet Investec has impressive financial strength with a CET1 capital ratio of 13%. Even if profits drop, and possibly Investec’s share price too, that strong balance sheet should still see it hit those dividend forecasts.
Put together, I think these six dividend stocks could be a great way to target a passive income.
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Royston Wild owns shares in Legal & General and Barratt Developments.
