2 safe FTSE 100 shares with dividend yields above 4%

Are these the best FTSE 100 shares for dividends and safety?

| 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.

Today, I’m taking a look at two FTSE 100 shares that I believe offer solid long-term dividend growth potential.

Regulated monopoly

First up is National Grid (LSE: NG), the UK’s largest listed utility company. With a relatively low beta of just 0.48, its shares tend to be less volatile than the wider index, which suggest that National Grid is a less risky investment.

One of the biggest advantages for National Grid, and which explains why it has such a low-risk business model, is the exceptionally high initial costs needed to build infrastructure for electricity transmission and gas distribution. This makes National Grid a natural monopoly, which means it faces no competition whatsoever.

Should you invest £1,000 in National Grid 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 National Grid made the list?

See the 6 stocks

Instead, nearly all of its revenues are regulated by Ofgem, via the RIIO regulatory framework, which determines how much the company is allowed to earn on investments made to its infrastructure assets. These revenues are linked to RPI inflation and don’t depend on volumes or commodity prices. This results in the company generating stable earnings and cash flows year-on-year, and means its shares have staying power.

The company is undergoing a major transformation, which should reinforce its status as a ‘shareholder friendly’ company. In December, the company agreed to sell a 61% stake in its gas distribution network, which should allow it to focus on its faster-growing electricity transmission business.

The sale received the green light from the European Commission last week, which means the deal is expected to close in the coming weeks. And once completed, National Grid intends to return £4bn of its net proceeds to shareholders via a combination of a special dividend and share buybacks. Additionally, National Grid’s rate of earnings growth should pick up following the deal, and that would be further good news for dividend investors.

Annual dividends per share have increased more than 60% over the past decade, with a compound annual growth rate (CAGR) of 5.0% over the past 10 years. Looking forward, National Grid has pledged to grow ordinary dividends at least in line with RPI inflation for the foreseeable future, following a share consolidation later this year, intended to reflect its smaller asset base following the sale of its gas network.

At a current price of 995p a share, National Grid has a dividend yield of 4.5%.

Diversified business model

GlaxoSmithKline‘s (LSE: GSK) dividend safety comes from a combination of two factors: the non-cyclical nature of demand for pharmaceutical products and the company’s unique diversified business model.

In addition to the traditional pharmaceutical business, GSK owns a large consumer healthcare businesses, which generates more than a quarter of its revenues, and a sizeable vaccines business, which accounts for another 16% of group revenues. Together, these two businesses account for a growing proportion of GSK’s revenues and a majority of its earnings growth in recent years.

An anticipated 9% earnings rise at GSK this year gives its shares a reasonable forward P/E rating of 15.4 times. And this would fall to 14.7 times in 2018 on forecasts of further earnings improvement of 4%. With an improving earnings outlook and strong diversification, I reckon GSK represents a great pick for long-term income investors.

Should you buy National Grid now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation 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.

Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

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

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »