Dividend stocks to beat rising inflation

Inflation-busting Legal & General Group (LSE:LGEN), NatWest Group (LSE:NWG) and Imperial Brands (LSE:IMB) are among the leading income plays in the FTSE 100 index as investors seek protection against rising UK prices.

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A total of 46 blue-chip companies trade with forecast dividend income above the current inflation rate of 3.1%, a figure that reaches 176 stocks across the FTSE All-Share.

The income appeal of the UK stock market is increasingly in focus after figures this week showed that higher fuel prices pushed August's inflation rate up from 2.9%. The Bank of England also warned today that its projections point to a peak of more than 4% by early next year.

The current FTSE 100 average yield is in line with inflation at 3.1%, with BT Group (LSE:BT.A), Lloyds Banking Group (LSE:LLOY) and Centrica (LSE:CNA) among those set to keep pace with rising prices based on forecast yields of between 4% and 4.2%.

The overall top pick for blue-chip income investors is Legal & General, whose forecast yield of 7.4% is based on expectations that it will continue to grow its dividend by 2% a year.

Fellow life insurers Standard Life (LSE:SDLF), which changed its name from Phoenix Group in March, and M&G  Ordinary Shares (LSE:MNG) also feature in the FTSE 100 top 10 based on forecast yields of more than 6%.

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However, all three are set to be overtaken by North Sea-focused Ithaca Energy  Ordinary Share (LSE:ITH), which brings a forecast yield of 7.9% when it joins the FTSE 100 in Monday's quarterly reshuffle.

Ithaca's entry to the blue-chip ranks comes after it recently raised its 2026 dividend guidance.

It still only ranks as the 20th best yielding stock in the FTSE All- Share, where share price falls since the Middle East war are a factor in several of the chunky dividend yields.

Yields of 8% and above can be regarded as a sign that the market thinks the dividend is unsustainable. So companies with a big buffer of earnings to defend their payouts should be a starting point for investors seeking reassurance on this front.

Forecast dividend cover of at least two times applies to two of the FTSE 100's top 10 yielders - the 6.7% of Imperial Brands and the 6.3% of Investec (LSE:INVP). Further down, the 4.5% yield of BP (LSE:BP.) is 3.2 times covered and the 3.6% yielding 3i Group Ord (LSE:III) 5.4 times.

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Investors may also wish to consider high-yielding stocks with long records of dividend growth.

The 6% yield of British American Tobacco (LSE:BATS) leads the way, having lifted its annual dividend for 26 years in a row.

The highly cash generative company behind the brands Dunhill, Lucky Strike and Vuse has a long-running policy of targeting 65% of long-term sustainable earnings. This record included dividend growth of 2% in the most recent financial year to a total of 245.04p.

Imperial, which rebased its dividend in 2020, trades with a higher yield of 6.7% after its shares lost a fifth of their value year-to-date compared with BAT's broadly flat performance.

ICG (LSE:ICG), which is the global alternative asset manager previously known as Intermediate Capital Group, yields a forecast dividend income of 4.9%.

It boasts a 16-year record of dividend growth, which over that time has grown at an annualised rate of 11%. In the long term, ICG has said it intends to increase the dividend per share by at least mid-single digit percentage points on an annualised basis.

The traditional income stocks of United Utilities Group  Class A (LSE:UU.) and Severn Trent (LSE:SVT) are on runs of 16 years and 10 years respectively, with forecast yields of 4.1% and 4.3%.

The 4.4% yielding National Grid (LSE:NG.) is another popular stock with income investors, given that the dividend is protected in real terms through benchmarking against the increase in average annual CPI inflation plus housing costs (CPIH).

Biggest FTSE 100 dividend yields

Source: ShareScope, 16 September 2026

Several stocks in the top 20 blue-chip yielders have grown dividends every year since Covid, including 5.8% yielding Aviva (LSE:AV.) after the insurer's boss Amanda Blanc implemented a policy to raise the cash cost of the payout by mid-single digits.

Those on a six-year run also include the 6.6% yielding property firm Land Securities Group (LSE:LAND) as well as banking giant NatWest, which trades with a forecast yield of 5.3%.

The lender's existing shareholders are set to receive 12p a share tomorrow (Friday), which is part of the £4.25 billion haul due from the sector's five biggest players in September.

Among other popular sectors for income investors, the 7.2% yield of LondonMetric Property (LSE:LMP) represents the current pick of the property space.

The urban logistics-focused REIT has increased its dividend per share for 11 years running, including by 3.8% to 12.45p for the 2025/26 year.

Chief executive Andrew Jones recently said the company was a step closer to its ambition of “dividend aristocracy” - representing 25 consecutive years of growth.

He added: “We are grounded in the belief that income compounding is one of the true wonders of investing – the essential ingredient and rocket fuel of long-term wealth creation.”

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Housebuilders used to lead the way in terms of income potential as the return of cash built up on balance sheets contributed to yields of 9% or more in the case of Taylor Wimpey (LSE:TW.) and Barratt Redrow (LSE:BTRW).

The yield of Persimmon (LSE:PSN) became an unsustainable 15% by 2022 as shares weakened in the face of deteriorating trading conditions. The figure is now 5.2% prior to the company's FTSE 100 relegation in this weekend's reshuffle.

The exit leaves just Barratt Redrow in the top flight. Its forecast yield is down to 1.9% after it said yesterday that £400 million of capital returns would be split between share buybacks of £386 million and a nominal 1p per share dividend payment worth £14 million.