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Dividend shares are brilliant because they offer income on top of any capital growth when the share price rises. Effectively, investors get two bites of the same cherry.
Even if a share price stalls, the dividend still rewards investors for their loyalty. And if the price dips, reinvested dividends may pick up more shares at a lower level, which can really pay off when they recover.
As a huge fan of FTSE 100 income stocks, I was intrigued to see Chris Beauchamp, chief market analyst at IG Group, highlight three “dividend stars” to watch, citing their consistent, well-supported dividends.
They’re all companies I admire, offering some of the safest shareholder payouts on the FTSE 100, alongside potential growth. There are no guarantees this will continue, but I think all three are worth considering for a balanced Stocks and Shares ISA or Self-Invested Personal Pension (SIPP).
HSBC offers income and growth
Beauchamp’s first pick is HSBC Holdings (LSE: HSBA). He says the Asia-focused bank has “rebuilt its reputation as a dependable income stock, steadily lifting dividends over the past five years”.
Today, it has a trailing yield of just over 5%, supported by strong profits and capital discipline. As Beauchamp puts it: “Investors get a solid and sustainable income stream without excessive risk”.
HSBC has also delivered bags of growth, the share price up 48% in the past 12 months and 202% over five years.
Despite that, the shares remain reasonably valued, with a price-to-earnings (P/E) ratio of 10.5. Risks include falling interest rates, which could squeeze margins, and US-China trade tensions. But long-term the rewards appear to justify taking them.
Aviva shares have flown
Next is insurer Aviva (LSE: AV). Its shares are up 41% over one year and 152% over five. The trailing yield is 5.3%, despite the strong run.
Beauchamp highlights its “streamlined business and strong cash generation”. Payouts are well-covered and backed by healthy capital reserves, offering a dependable income stream, he says.
I would echo that. Under CEO Amanda Blanc, Aviva’s become a leaner, more efficient operation. The shares are now looking pricey with a P/E of 28 though, while a broader stock market crash could hit flows into its asset management division. But I think it’s worth considering with a long-term view.
Sainsbury’s looks tasty too
J Sainsbury is a FTSE 100 dark horse, overshadowed by sector leader Tesco. Yet its shares have risen 25% over one year and 65% over five.
The yield’s lowest of the three though at 2.8%. The payout was frozen at 13.1p per share in 2023 and 2024, before increasing by 3.82% to 13.6p in 2025. Margin pressure from grocery price wars, inflation and rising staff costs are a concern.
The shares are pricier than the other two with a P/E of 14.75. Beauchamp notes “resilient trading and strong cash flow”, with payouts underpinned by efficiency gains and steady grocery demand. Let’s hope the cost-of-living crisis eases, and shoppers can spend more.
All three income heroes offer a blend of income and growth, with relatively safe payouts, making them worthy considerations. They may not be the very safest dividend stocks on the FTSE 100, but I think they’re pretty close. Investors should take a long-term view to ride out any short-term volatility and let dividends compound over time.
