As investors, it is important to remember there's more than one way to make money from shares. Share price appreciation is the most obvious method, but receiving a steady stream of dividends can be another. Fortunately, there are plenty of shares in the S&P/ASX 200 Index (ASX: XJO) that offer some form of passive income.
It's worth prefacing that dividend yield alone as a measurement can at times be deceptive. Because yield is a backward-looking metric reliant on the company's share price, if the price falls the dividend yield can be inflated. Following this, the company might reduce its payout.
Keeping that in mind, let's dive into our five highest-yielding ASX 200 shares.
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5 ASX 200 shares with beefed-up dividend yields
BHP Group Ltd (ASX: BHP)
The first ASX 200 share on our list is also the biggest company by market capitalisation out of the bunch. Standing at $132 billion, the diversified mining giant is boasting a dividend yield of 9.6%.
BHP is one of many miners to benefit from a booming iron ore price throughout the 2021 financial year. In addition, other commodities, such as copper, experienced a massive surge in price. As a result, the company served up a record fully franked dividend of 200 US cents per share in August 2021.
The BHP share price is down around 4% in the last 12 months following the pullback in iron ore prices.
AGL Energy Limited (ASX: AGL)
Typically dividend-paying ASX 200 shares are profitable. However, AGL Energy is the only company on this list that is currently unprofitable. Despite this, one of Australia's largest energy providers reached deep into its pockets to pay $427.9 million worth of dividends in the last year — giving this share a yield of 10.4%.
This outlandishly high yield has been partly a product of AGL's falling share price over the past 12 months. Although shareholders might have received solid dividends, their capital was reduced in value by 43% during the year-long stint.
Magellan Financial Group Ltd (ASX: MFG)
Once again, the next ASX 200 share ranks highly on dividend yield due to its uninspiring price performance over the last year.
Currently, the Magellan share price is offering a dividend yield of 10.9%. This might appear remarkable at first glance. However, when paired with the full context — that the company's share price is down 59% in the past 12 months — it becomes less surprising.
Investors have been scampering to sell out of Magallen shares in recent months. Sentiment shifted for the fund manager following its funds' underperformance and loss of a significant client, St. James Place.
Rio Tinto Limited (ASX: RIO)
Sliding into second place on the ASX 200 shares with the highest dividend yield is Rio Tinto. Much like BHP Group, this iron ore mining giant had a gangbuster year for earnings. As a result, the company passed on these staggering profits to shareholders in the form of a big dividend — giving it a 13.3% yield.
Similarly, the world's second-largest metals and mining company hasn't had as much luck for its share price. Over the last 12 months, shares in Rio Tinto have fallen by more than 13%.
Meanwhile, analysts at Citi are unphased by the pullback. In fact, the broker sees the current share price as a buying opportunity, assigning it a price target of $115 per share.
Fortescue Metals Group Limited (ASX: FMG)
The last ASX 200 share on this list blows its dividend-paying peers right out of the water. At present, Fortescue Metals Group is rocking a mind-bending 20.7% dividend yield.
As a testament to Fortescue's incredibly low cost of mining iron ore, the company achieved similar earnings (US$10.3 billion) to BHP Group in FY21 on a little more than one-third of the revenue. As such, shareholders were showered in dividends in the last year.
However, Fortescue is in the same boat as Rio Tinto and BHP — having suffered an 18% fall in its share price in the past year.
