Stock market crash: 3 FTSE 100 dividend shares I’d buy and hold for the long term

The stock market crash has given investors a great opportunity to invest in top FTSE 100 dividend shares, and hold them for the long run.

| 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.

A stock market crash is a great opportunity for long-term buy-and-hold investors. It allows them to pick up top FTSE 100 shares when markets are down then sit back and wait for them to recover.

Right now, I would target FTSE 100 companies with a proven ability to increase their dividend, year after year. If they have been able to maintain payouts during the stock market crash, even better. These three UK shares have increased their dividends for the last 10 consecutive years, according to research from AJ Bell. That suggests we can expect plenty of growth in future.

Spirits maker Diageo (LSE: DGE) is never the biggest yielding stock on the FTSE 100. Right now, it yields ‘just’ 2.74%. That doesn’t worry me, though. The attraction with Diageo is that management has a progressive attitude to shareholder payouts. One reason the yield looks so low is that the share price was rising so rapidly (before the stock market crash) that it struggled to keep up.

Stock market crash targets

Management did hold the dividend earlier this month, but these are exceptional circumstances. Diageo’s pre-tax profit dropped by half in 2020, so I think it is quite impressive that management paid a dividend at all.

The Diageo share price inevitably fell in the stock market crash. While people have been drinking more at home during the lockdown, they have drunk an awful lot less in bars, restaurants and pubs. However, the fact that the dividend has kept flowing suggests to me that Diageo has the resilience to resume payouts when the world edges back to normal. Markets believe it will raise its dividend by a decent 4.4% in 2021. That would be more than enough to keep me happy.

Now looks like a good time to invest in sensible defensive stocks such as utilities, and I like the look of water company Pennon Group. Right now, it yields a healthy 4.31%. That looks highly attractive with the base rate at just 0.1%.

I like these 3 FTSE 100 dividend heroes

Although Pennon reported a 4.1% drop in profit before tax in June, partly due to a provision for non-payment of bills during the pandemic, it still upped its total dividend by 6.6%. Markets expect another 4.4% hike next year. The main reason investors buy utilities is for dividends, and I’m sure management will do all it can to maintain payouts. It should remain a relatively reliable source of income, even if we get a second stock market crash.

If you fancy an even higher income, I would check out insurer Legal & General Group. This is another FTSE 100 dividend hero, having hiked its payout for 10 consecutive years. While rival Aviva meekly pulled its dividend during the stock market crash, L&G managements stuck by its payout. Incredibly, markets anticipate an increase of 5.4% next year.

As well as a massive income, the stock market crash has left Legal & General stock trading at a bargain 7.3 times earnings.

I reckon now is a great time to buy all three stocks, with the aim of holding them for years and years, and watching those dividends grow.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and Pennon Group. 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

Here’s how I’d use £3,000 to target a second income that grows each year

Our writer explains the approach he'd take to trying to build a second income that gets bigger over time, by…

Read more »

Elevated view over city of London skyline
Investing Articles

Is it time to buy this incredible FTSE dividend share?

Christopher Ruane examines one FTSE 100 share with a phenomenal dividend history. Does a steep share price fall this year…

Read more »

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

This FTSE 100 share has just crashed another 20%. Its P/E is now just 9.9 so should I buy?

Harvey Jones was tempted to buy this FTSE 100 share after it crashed in October. Now it's crashed again, it…

Read more »

Investing Articles

Could Trump 2.0 be good for FTSE 250 stocks?

Donald Trump’s just been elected President of the United States for a second time. Our writer considers whether this could…

Read more »

Investing Articles

Trading at a 10-year low, this FTSE income stock now yields a chunky 6.99%!

Harvey Jones has been watching from the sidelines as shares in this FTSE 100 income stock just fall and fall.…

Read more »

Dividend Shares

Is a Bank of England rate cut good for the Lloyds share price?

Ken Hall analyses what the latest interest rate cut could mean for the Lloyds share price with the UK bank’s…

Read more »

Investing Articles

2 brilliant bargains I’m considering for my Stocks and Shares ISA!

These FTSE 100 and FTSE 250 shares offer exceptional value on paper. Here's why I'm considering them for my Stocks…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Dividend Shares

How much passive income could I generate with just £10 per day?

Ken Hall wants to create his £10,000 yearly passive income dream by investing just £10 every weekday day in Footsie…

Read more »