Here’s why I believe this stock could be the best income investment in the FTSE 100

With the whole FTSE 100 (INDEXFTSE: UKX) at your disposal, here’s one dividend hero that could be better than anything else.

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.

There is no shortage of attractive income investments in the FTSE 100, but I believe that there is one company that could be a better dividend buy for your portfolio than any other share in the UK’s leading stock index.

Unbeaten record

Almost every company in the FTSE 100 offers investors a dividend. However, few companies qualify for the elite club of dividend aristocrats — firm’s that have raised their dividends at least once per year for 25 years or more. These strict criteria mean that dividend aristocrats are rare and any stock that can achieve this record, instantly makes it into the dividend hall of fame.

Royal Dutch Shell (LSE: RDSB) does not, technically, qualify as a dividend aristocrat. The company hasn’t cut its dividend since the Second World War although it has frozen the payout. 

Should you invest £1,000 in Antofagasta Plc 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 Antofagasta Plc made the list?

See the 6 stocks

Since 2014, the dividend has been frozen at a rate of $0.47 per share per quarter. Nevertheless, while the company’s nominal dividend has been frozen, for UK investors the actual amount received has increased thanks to the falling value of sterling. 

According to my figures, Shell’s per share dividend has totalled $1.88 per annum since 2014, but UK investors received a total of 118.5p in 2014, 125.5p in 2015, 144.05p in 2016 and finally 142.33p for 2017. Based on these numbers, the annual dividend distributed to UK shareholders has increased by around 5% per annum since 2014.

Looking at these numbers, I reckon Shell could qualify as a dividend aristocrat even though it does not technically meet the exact qualifications.

Looking to the future 

A company’s history can only tell us so much about its future potential. What really matters is the business’s current fundamentals, and Shell’s are strong.

The business is a huge cash cow. After spending the last four years disposing of non-core assets, slashing costs and improving the efficiency of its operations, I believe the company is more attractive as an investment today than it has been for many years. 

Shell’s operating profit margin is an excellent guide to how much the business has changed since 2014. On a trailing 12-month basis, the company has reported an average operating profit margin of 7.2%, during this period, the price of Brent crude has averaged around $65 a barrel. In comparison, throughout 2012 and 2013, when the price of oil traded higher than $100 a barrel, Shell’s operating profit margin averaged 7%. 

The above figures show that thanks to management efforts to restructure the business over the past four years, Shell is almost as profitable today as it was in 2013, even though the price of oil is more than 40% lower (based on those trailing 12-month figures).

And looking at the group’s expanding margins, it is no surprise that the City expects Shell’s earnings per share (EPS) to leap 41% for 2018, followed by growth of 16% for 2019. Based on these estimates, the shares are trading at a forward P/E of 10.7 and support a dividend yield of 5.8%.

With earnings growth set to explode, dividend growth should follow, and that’s why I think now could be the time to buy this income champion.

Should you invest £1,000 in Antofagasta Plc 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 Antofagasta Plc made the list?

See the 6 stocks

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.

Rupert Hargreaves owns shares in Royal Dutch Shell B. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Can the Rolls-Royce share price hit £13 in the coming year?

After a stunning couple of years for the Rolls-Royce share price, can it keep up its recent momentum? This writer…

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Here’s how a £20k ISA could produce £1,580 of passive income in the next year

A Stocks and Shares ISA stuffed with dividend shares can be a lucrative source of passive income. Christopher Ruane explains…

Read more »

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »