The coronavirus market crash means more than a third of FTSE 100 dividend shares have reversed course and cut payouts to shareholders. UK investors will lose out on more than £20bn in expected dividend payments as a result.
But there are still some top quality FTSE 100 dividend shares bucking this trend.
The three I’ll cover today are 3i Group (LSE:III), Legal & General (LSE:LGEN) and British American Tobacco (LSE:BATS).
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These three shares are between 15% and 32% cheaper than at the start of 2020. But follow the charts and you’ll see each is in a general uptrend since the devastating lows of 19 March.
Legal & General
Short sellers have tried to push down the LGEN price in recent weeks, but it keeps bouncing back. The share price dropped 10% in a week when doom-mongers placed big bets it would follow Lloyds, Barclays and RBS and cancel its 2020 full-year dividend.
But the naysayers got their fingers badly burned when CEO Nigel Wilson confirmed he would pay a 12.64p final dividend. This £753m loyalty bonus confirms to me that the balance sheet is strong enough to see the company through this short-term weakness.
I can hardly believe my luck that I can pick up Legal & General on a P/E ratio of 6, with a confirmed 8.5% dividend yield. Tens of thousands of private investors rely on their dividends for income. And younger investors might buy to reinvest dividends, using the magic of compounding to produce greater Stocks and Shares ISA wealth.
3i Group
I’ve long been a fan of this FTSE 100 investment firm because of its geographical and sector diversity. And paying a 4.5% dividend is just the beginning. Managers Ben Loomes and Phil White have their finger on the pulse of quality investments and two in particular stand out recently.
One is £214m for a large data centre provider and the other is £60m to create a bioprocessing platform to speed up commercial production of vaccines. The global lockdown has seen home internet and video usage skyrocket. Meanwhile biopharma companies now need to ramp up test and vaccine research and production, so these investments look like very good decisions indeed.
In the last 12 months, the net asset value (NAV) has grown by 13%. And you can buy at a 15% discount to NAV right now. If you had bought at any other time in the last 12 months you would have paid an average 29% premium. So I see plenty of long-term upside just waiting for investors to cash in.
British American Tobacco
I covered British American Tobacco in March when broker Jeffries said buying this FTSE 100 dividend share was “practically stealing“. And my mind hasn’t changed.
There’s no indication CEO Jack Bowles plans to cut the 7.1% yield. Analysts at Citi added in a recent research note that BATS would be able to pay off interest, debts and still maintain dividend payouts in 2020.
Some investors might give BATS a swerve because of the ethics of investing in tobacco, as well as a lower share price compared to just a few years ago. But on a purely financial level based on the price today, it makes sense. I expect both share price appreciation and dividend growth going forward, simply because the company generates so much cash.
At prices 15% cheaper than January I’m grabbing as much in my ISA as I can afford.
