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The average dividend yield among FTSE 100 stocks is around 3.3%. That’s a nice dollop of passive income for those willing to put their money in the market. However, some members of the index offer (a lot) more, albeit arguably in exchange for a bit more risk.
Here are two that I think are worth considering.
Stuck in a rut
Taylor Wimpey (LSE: TW) might seem like a odd choice given that 1) the company recently announced a pre-tax loss for the first half of 2025 and 2) the share price is down by over a third in the last 12 months. To make matters worse, the interim dividend has been cut, albeit only slightly.
It’s clear that this company — and all other listed housebuilders — could do with a bit of good news to get their respective mojos back.
Whether that comes soon is debateable. The market isn’t exactly in rude health right now. Last week’s cut in UK interest rates even failed to provide a boost, suggesting that investors are still wary.
Worth the risk?
But I remain optimistic on the long-term outlook for this sector. The chronic undersupply of new housing will need to be addressed and the current Labour government wants to build 1.5m homes in within a five-year period. Whether it ends up hitting that target remains to be seen.
After getting a little frothy in 2024, the valuation has returned to more palatable levels too. The forecast price-to-earnings (P/E) ratio now stands at 12.
Even if management is forced to take a scythe to its payouts again, I reckon the yield — currently at a staggering 9.2% — will still be far above the FTSE 100 average. Yes, levels of free cash flow may have fallen over the last few years, but we’re not talking about a company in financial distress.
Another above-average dividend yield
A second top-tier stock that pays well over the average yield is insurance and retirement specialist Legal & General (LSE: LGEN).
In contrast to the aforementioned housebuilder, its share price has been going great guns. A 15% gain in the last 12 months beats the index return. The big cash distributions made over this period — in September 2024 and June 2025 — will have only served to extend this outperformance.
Right now, analysts have the stock down to return 21.7p per share to investors for FY25. Using the current share price, this equates to a stonking yield of 8.3%.
But how sustainable is that?
For balance, it’s worth being aware that this is a very low-margin, not to mention competitive industry. A sustained downturn in the stock market wouldn’t be good news either. In such a situation, assets under management would likely fall as people get increasingly worried about their finances. A knock-on effect of this would be that Legal & General makes less in fees. That raises the prospect of a cut to the dividend.
But again, I could argue that any reduction would still leave the shares yielding far above average.
Given its record of raising payouts year after year, I suspect CEO Antonio Simoes would be keen to avoid upsetting anyone. Unless another financial crisis plays out, my money would be on dividends being left untouched in tough times rather than reduced.
