The FTSE 100 is probably not full of tech giants just like the S&P 500, nevertheless it pays considerably increased dividends. I believe traders aiming to construct a second revenue ought to look no additional.

A good yield

Based on AJ Bell, the UK’s blue-chip index is predicted to dish out a whopping £83bn in dividends in 2025. That will be up 5% on 2024, although nonetheless beneath 2018’s file of £85.2bn.

It places the ahead dividend yield at about 3.8%, which is considerably increased than the S&P 500’s 1.3%. Traders may subsequently count on a second revenue of round £760 a yr from a FTSE 100 index fund.

As rates of interest maintain falling, such a yield will look extra engaging relative to money. And which may push share costs increased, in idea at the least, including to the full return.

It’s price noting that whereas the S&P 500 has lengthy outperformed the Footsie, the latter is doing nicely thus far in 2025. It’s up 5.3%, in comparison with little change within the benchmark US index.

If these positive aspects maintain, together with the forecast yield, that will be stable return, in my view. Particularly given all of the uncertainty round world commerce and US tariffs.

Lastly, the FTSE 100 can also be considerably cheaper, buying and selling at roughly 13 instances forecast earnings for 2025. The determine is round 21 for the S&P 500. I believe that appears like an honest margin of security, even when FTSE 100 firm earnings are available in lighter than anticipated this yr.

Aiming for increased

Having stated that, I wouldn’t spend money on a FTSE 100 index fund myself. I favor to choose and select what I take into account to be the most effective shares to carry long run. This contains dividend shares that yield far increased than the typical.

For instance, one I just like the look of proper now’s insurance coverage group Aviva (LSE: AV.). The inventory is up 153% over 5 years however nonetheless seems low-cost, buying and selling at 11.3 instances this yr’s forecast earnings.

Furthermore, it’s sporting a forward-looking yield of 6.6%. That’s forecast to rise above 7% subsequent yr, whereas nonetheless being lined by anticipated earnings.

If these forecasts show right, then traders with £20k within the inventory would accumulate roughly £1,320 in dividends this yr and £1,415 subsequent yr.

One factor price highlighting right here although is that Aviva’s proposed £3.7bn acquisition of rival Direct Line is being scrutinised by the Competitors Markets Authority. If the deal is blocked, this might restrict Aviva’s progress prospects within the UK.

One other danger price mentioning is the opportunity of an financial downturn, which may see prospects cancelling some insurance coverage insurance policies.

Diversification

In fact, the chance with investing in particular person shares is that their dividends aren’t assured. Subsequently, I don’t put all my eggs in a single basket, and as an alternative goal for a pleasant unfold of revenue shares.

I personal shares in Aviva, because it’s rising properly and administration has dedicated to a progressive dividend coverage.

Fortuitously, traders wouldn’t should look far to search out different shares to enhance Aviva. The FTSE 350 is full of high-yield dividend shares proper now.