1 FTSE 100 and 1 FTSE 250 dividend stock to buy for 2022

To grow my passive income in 2022, I have to channel my investments into dividend stocks. The good news is that both the FTSE 100 and FTSE 250 indexes offer me choices with average dividend yields that are well above average. Here I look at two such stocks. 

Advantage insurers

The two stocks have more in common than just paying good dividends. They are both insurers too. According to data provider statista, the global insurance market will grow by more than 44% between 2020 and 2025. This is favourable to the companies in the sector, which can ride the growth wave now.

Now that economic recovery is underway, I reckon that non-life insurers could benefit in particular. As incomes rise, people are more likely to get insurance. And they are also more likely to make auto and property purchases, both of which are big non-life insurance categories. Life insurance in countries like the UK is anyway likely to grow on account of an ageing population. In the UK, the group aged 65 and over has grown by 23% in the last decade or so. This compares to an only 7% increase in the country’s population as a whole. 

Legal & General: FTSE 100 stock with a 6% dividend yield

Keeping this in mind, the one FTSE 100 stock I like is Legal & General (LSE: LGEN), the life insurer and investment manager. There is much to like about the stock. First, it has a dividend yield of 6%. With inflation at 4% right now, and expected to average at this level in 2022 as well, I like a stock that can give me positive real returns. Moreover, this high dividend yield is not a flash in the pan. The stock has yielded on average 6.1% for the last five years. 

Its performance has fluctuated, but I like that it has managed to clock net profits year after year. This is important considering that I would like to buy the stock with dividends in mind. If a company is unable to maintain its profits, it is unlikely to keep on paying dividends.

On the downside, its share price has not really gone anywhere in the past year, which is underwhelming. However, considering that it is still trading below its pre-pandemic highs, I think some upside is possible here. I would buy it for dividends. 

Direct Line Insurance: FTSE 250 high dividend stock to buy on dip

The FTSE 250 stock I like is Direct Line Insurance. It has a pretty good dividend yield of 8.3% right now, better than that for Legal & General. And over the last five years, it too has maintained a strong trend, with an average yield of 5.4%.

The general insurer’s share price has taken a hit in recent years owing to its weak performance, but I reckon that could change going by the improvements in its latest numbers and as the UK’s economic recovery gathers steam. I have bought the stock already.