I’d buy these 7%+ FTSE 100 dividend stocks for my ISA for May

Looking for dirt-cheap dividend shares? Royston Wild has his eye on a couple of income heroes from the FTSE 100. Come and take a look!

| 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 is shooting back towards 6,000 points on Monday. Lockdown measures in many parts of the world are being steadily lifted, also lifting investor sentiment. It’s hoped this end-of-month rally can be extended into May too, with more quarantine rollbacks anticipated.

Share investors clearly need to remain on high alert though. Rising infection rates could stop the lockdowns being eased, or result in barriers being put back up. The possibility of a second wave of deadly infections later in 2020 should be front and centre in their minds.

That said, there’s an abundance of Footsie shares I reckon are great buys for May. Their long-term profits outlooks remain robust despite the Covid-19 crisis. And, at current prices, I reckon they’re too cheap to miss.

Make the connection

One such blue-chip I’d happily load up on now, or in the coming days, is Vodafone Group (LSE: VOD). This is a FTSE 100 share that not only trades on a rock-bottom forward price-to-earnings growth (PEG) reading of 0.5 times. It carries a monster 7.3% dividend yield too.

Telecoms providers are a particularly attractive sector to buy into today. They aren’t immune to the economic implications of the coronavirus breakout. But the more defensive nature of their operations mean they’re in a stronger position than many to weather the storm. This is especially important, given the aforementioned uncertainty over future infection rates and the potential need for more lockdowns.

Vodafone should be on the radar of income investors too, given the steady stream of dividend cuts across UK stock markets. The benefit of its recurring revenues, allied with the strength of its balance sheet, puts it in great shape to keep doling out mighty shareholder payouts, despite the current crisis.

The FTSE 100 company remained on course to generate whopping free cash flow (excluding spectrum auction costs) of €5.4bn in the financial year to March, according to February’s most recent financials. Vodafone is a brilliant lifeboat in these uncertain times, in my opinion.

Screen of price moves in the FTSE 100

Another FTSE 100 favourite

Phoenix Group Holdings (LSE: PHNX) is another low-valued big-cap I’d buy today. A prospective price-to-earnings (P/E) ratio of 8 times seriously undervalues the insurance giant’s long-term outlook. And a corresponding dividend yield of 8.3% is one of the biggest on the FTSE 100.

Insurance is, like telecoms, one of the more robust stock sectors in times of social, economic and political chaos like these. But this isn’t the only characteristic Phoenix shares with Vodafone. A critical quality for dividend chasers, Phoenix is also a formidable generator of cash. In 2019, cash generation came in at a whopping £707m, beating a goal of £600m-£700m.

Phoenix’s aim is to grow cash generation up to a possible £900m in 2020 too. But don’t think of the business as a great buy for the short-to-medium term. Its imminent £3.2bn acquisition of ReAssure will create the country’s biggest life insurance and pension provider with the clout to pursue an exciting growth path. I’d happily buy this income hero for my ISA too.

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.

Royston Wild has no position in any of the shares mentioned. 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

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

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 »