The FTSE 100 has lagged global indices in 2025, rising just 5.7% compared to double-digit gains in the Nasdaq 100, Kospi, and Nikkei 225, driven by the artificial intelligence boom. For income-focused investors, however, the index still offers compelling opportunities in high-dividend stocks that can support a retirement portfolio.
UK government bonds (gilts) present a key alternative, with yields on two-year notes at 4.12%, five-year at 4.35%, and ten-year at 4.82%. While a 4.8% yield is attractive and free from capital gains tax, inflation remains a concern. UK inflation eased to 2.8% in April but is expected to rise in July due to energy price adjustments, potentially reducing real returns to around 2%. For those willing to accept equity risk, dividend stocks may offer higher long-term income potential.
Legal & General and Aviva: High-Yield Insurance Giants
Legal & General (LGEN) and Aviva (AV) are two of the FTSE 100's top dividend payers. LGEN manages over £1.17 trillion in assets and offers a dividend yield of 7.76%, while Aviva, with £454 billion in AUM, yields 6.67%. A £10,000 investment in each would generate annual income of £770 and £667, respectively. However, both stocks have underperformed the FTSE 100 this year—Aviva is down 8.76%, and LGEN has risen only 5%.
Standard Life: A Retirement Savings Powerhouse
Standard Life (formerly Phoenix Group) has gained over 21% in the past 12 months while still paying a 7% dividend. The company recently announced a £2 billion acquisition of Aegon UK, which will create a retirement savings leader with over 16 million customers and £480 billion in assets. Its operating cash generation rose to £1.47 billion last year, reflecting solid business performance.
NatWest Group: Banking on Dividends
NatWest, parent of Royal Bank of Scotland, Ulster Bank, Coutts, and Lombard, offers a 5.5% dividend yield—higher than peers Lloyds and Barclays. The stock has risen 20% over the past year, supported by first-quarter total income of £4.358 billion and profit of £1.5 billion. Other notable FTSE 100 dividend stocks include HSBC, IG Group, Diageo, BP, and British American Tobacco.
For context on broader market trends, see our coverage of the recent tech selloff and diversification strategies beyond AI.
This article is for informational purposes only and does not constitute financial advice.
