2 hot FTSE 100 dividend stocks I’d buy in February

These two shares offer excellent income potential.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Buying dividend stocks has generally been a sound strategy in recent years. Low levels of inflation plus low interest rates have resulted in higher-yielding shares becoming more popular. Even though inflation is expected to rise, companies that offer growing dividends and a relatively high yield should still prove popular in 2017. Here are two stocks which offer just that combination, as well as wide margins of safety through low valuations.

A growing life insurer

Aviva‘s (LSE: AV) decision to merge with Friends Life has thus far proven to be highly successful. The expected synergies are on target to be delivered and the combined entity should provide greater resilience in future years. It should be a more dominant player within the life insurance space and, since Brexit is unlikely to have a major impact on the business, its risk profile remains relatively low.

The company’s yield of 5.4% is around 180 basis points higher than the FTSE 100’s yield. Furthermore, it is likely to rise at a faster pace than that of the wider index, since Aviva is likely to raise dividends by at least as much as earnings growth over the medium term. Since it is forecast to post a rise in earnings of 14% this year, followed by 6% next year, this should easily beat inflation. The company could even be yielding over 6% within a couple of years.

Should you invest £1,000 in Prudential right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Prudential made the list?

See the 6 stocks

Aviva trades on a price-to-earnings (P/E) ratio of 9.6. While there is scope for the FTSE 100’s value to come under pressure since it is near to a record high, the company’s valuation indicates it offers an attractive risk/reward ratio.

A recovering healthcare play

AstraZeneca (LSE: AZN) may seem like an unlikely choice as an income stock. Certainty, at 5.2% it yields well in excess of the FTSE 100. However, it has not raised dividends in recent years, as its loss of patents has led to significant declines in earnings.

This situation is forecast to change. Although the company’s bottom line is expected to fall by 9% this year, growth is anticipated from 2018. In the 2018 financial year, AstraZeneca’s net profit is due to rise by 11% and this could be the start of a period of better performance for the business. It has a strong pipeline of potential treatments thanks to major investment in recent years. And with a growing bottom line could come a rising dividend. In fact, in 2018 its shareholder payouts are expected to rise by 2.2%.

Since AstraZeneca trades on a P/E ratio of 12.6, it appears to offer excellent value for money. Upward re-rating potential is high, especially since historically it has had a P/E ratio which is in the mid to late teens. Therefore, its shares could offer defensive appeal in 2017 during what could be a challenging period for the wider market. When combined with its bright income potential, this makes the stock a standout dividend play.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of AstraZeneca and Aviva. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »

Close up of manual worker's equipment at construction site without people.
Investing Articles

Down 65% from its highs, this FTSE 250 stock is one to consider buying low

Shares in a strong FTSE 250 company going through a cyclical downturn have caught Stephen Wright’s attention as a potential…

Read more »

Investing Articles

£20,000 invested in a Stocks and Shares ISA 5 years ago is now worth…

Stocks and Shares ISA investors have reaped enormous returns since the pandemic, but how much money have they actually made?…

Read more »