3 FTSE 100 dividend stocks that boast a wide moat and a 5%+ yield

Investors who intend to take a defensive position in the second half of 2019 should look to income-generating equities like British American Tobacco plc (LON:BATS).

| 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.

The FTSE 100 staged a solid rally in the first half of June, and it has still returned 9.1% in the year-to-date period. Weakness took over last week in the face of oil price volatility, poor industrial output growth in China, and the shadow cast by the Tory leadership race and the possibility of a general election

Investors should brace for more volatility as we look ahead to the second half of 2019. Today I am going to look at three of the top dividend stocks on the FTSE 100 that boasts yields exceeding 5%. I will be targeting companies that have a wide economic moat in order to stake a defensive position.

British American Tobacco

British American Tobacco (LSE: BATS) is the largest publicly traded tobacco company in the world. British American Tobacco boasts a market-leading position in over 50 countries. Global regulations in the tobacco industry have made it extremely difficult for any competition to pose a threat due to barriers of entry. To add to its advantages, consumers in this sector possess brand loyalty to an extent that is uncommon in the present day.

Unfortunately, shares at BAT slipped on June 12 after it reported that it had lost cigarette market share for the first time in years due to slower sales growth. Still, revenues from its new product categories have been promising with its Vype and Vuse vaping pens projected for revenue growth between 30% and 50% for the full year.

In February BAT increased its dividend by 4% to 203p for the full year. This comes out to a quarterly dividend payment of 50.75p per share. This represents an attractive 7% yield at the time of writing.

Royal Dutch Shell

Royal Dutch Shell (LSE: RDSB) is one of the largest oil and gas giants in the world, and the largest company in Europe going by 2018 revenues. Shell’s footprint spans every area of the oil and gas industry, making it a suitable target for those on the hunt for companies with a wide moat. Oil prices entered a bear market in early June as swelling supply has generated downward pressure.

This should not deter income investors. Shell has pledged huge returns for investors if crude maintains an average price level of at least $60 a barrel into the next decade. The company forecasts that its new projects will generate enough cash to fuel increases to dividends and buybacks from 2021 to 2025. Shell last paid out a quarterly dividend of 36.97p per share. Currently, this represents a solid 5.8% yield.

National Grid

National Grid (LSE: NG) owns regulated transmission and electricity generation facilities in the United Kingdom and the United States. As a utility with a wide moat, National Grid is naturally an attractive target for income investors. However, there are substantial political risks going forward especially if a general election is called. Jeremy Corbyn has vowed to re-nationalise National Grid and purchase shares at a substandard rate.

We should factor in current polling and odds of a general election being called, which reduces the risk surrounding the company. Its tasty dividend more than makes up for these remote threats. National Grid last increased its payout for fiscal 2019 to 47.34p per share. This represents a 5.6% yield right now. National Grid is poised to bump up its annual investment to £5 billion in the next two years, which will support its defensive appeal.

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.

Neither Ambrose nor The Motley Fool UK have a 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

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »