Big dividends: The highest yielding stocks on UK stock market

One of the UK stock market’s key attractions is the rich bounty of dividends on offer. There are companies with a history of returning copious amounts of money to shareholders and that makes the UK a fertile hunting ground for income investors.

At a headline level, the FTSE 100 yields 3.2% based on forecast payments. While 3.2% is less than you’d get from a best-buy cash savings account, if you do a bit of digging it is possible to get twice that amount for certain stocks. You could go even higher by looking at names in the FTSE 250 index.

Before we discuss the highest-yielding names on the market, it’s important to remember that companies offer no guarantees to pay dividends. They can cut or cancel them at any time.

Also, these are only estimates, and you might get less money in dividends than you first thought. It’s important to have a diversified portfolio so you are not reliant on one or a handful of stocks to do the heavy lifting.

Top dividend yields in the FTSE 100

Life insurance providers Legal & General and Phoenix are the top yielding stocks in the FTSE 100, the former offering an 8.7% dividend yield. For example, if you bought £10,000 worth of shares in Legal & General, you would expect to collect £870 in dividends over the following year.

Source: AJ Bell, ShareScope. Data as of 4 July 2025

The life insurance industry collects premiums from customers every month and invests that money in lower-risk assets. The goal is to make a profit and have enough money to settle insurance claims.

There isn’t a big need to reinvest money in a life insurance business in the way you would expect from a manufacturing firm opening a new factory or an engineer upgrading its equipment. As such, life insurance firms can find themselves with surplus cash and that helps to fund generous dividends.

It would be fair to suggest the bulk of an investor’s returns from a stock like Legal & General would come from dividends rather than capital growth. That’s evident if you look at a five-year share price chart where the stock mostly traded in a narrow, sideways range.

Housebuilders are known for paying good dividends, although their shares can move up and down in waves as they are sensitive to changes in interest rate expectations and economic activity.

Taylor Wimpey is one of the largest housebuilders in the UK and has an 8.2% prospective dividend yield. It spends money on buying plots of land, materials to build houses, and the associate costs of construction such as labour and energy. Its goal is to sell the finished property at a profit, using surplus money to buy more land and materials, and to pay dividends.

Top dividend yields in the FTSE 250

The highest yielding stock among mid-cap companies on the UK market is Ithaca Energy at 14.3%. Any yield above 9% would need extra investigation by potential investors, just to make sure this isn’t a one-off bumper payout or there is something odd going on. Companies aren’t normally that generous with dividends.

Ithaca Energy is an oil and gas producer in the UK North Sea. Its production increased by 50% in 2024 and its policy is to pay out 15% to 30% of post-tax operating cash flow in dividends.

Market forecasts imply it could pay out generous dividends this year and two years thereafter. The big unknown is how much it will get for oil and gas in the future, as commodity prices are unpredictable. That situation makes Ithaca a high-risk risk investment.

Source: AJ Bell, ShareScope. Data as of 4 July 2025

The second highest dividend payer in the FTSE 250 is Lancashire, a specialty insurer focusing on risks in areas including property, energy, marine and aviation. Just like the life insurance companies discussed earlier; Lancashire has a strong history of paying high dividends due to the nature of its business.

Other generous dividend payers in the FTSE 250 include various investment trusts in the renewable energy and property space.

One word of warning. A high yield can sometimes be the result of a big drop in the share price, where the market is worried about something. If the shares are falling because the market thinks earnings aren’t going to be as strong as previously thought, that raises the prospect of a potential dividend cut down the line. In this situation, a weak share price and a high dividend yield can be a red flag.