2 FTSE 100 dividend stars I’d buy now!

Jon Smith runs over two FTSE 100 dividend stocks that he thinks haven’t gained as much attention for their payouts as some other index stars.

| 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.

British bank notes and coins

Image source: Getty Images

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.

Over the course of the past few months, dividend stocks have been in focus. This has partly been due to rising dividend yields, but also because of high inflation. In my opinion, a lot of focus has been on FTSE 100 dividend stars from the mining and commodity space. Given the generous yields on offer, it’s easy to see why. However, I think there are some other strong players that have slipped under the dividends radar and that I’m keen to buy now.

A growth stock with income potential

The first FTSE 100 dividend stock is Royal Mail (LSE:RMG). I’ve written about the company before, but focused on the share price growth. In fact, even though the stock price is down 11% over the past year, it’s up an impressive 128% over two years. 

With the business enjoying a strong 2021 due to the pandemic, with lockdowns seeing more online ordering and deliveries. It also managed to hold its position in the market, despite tough competition from rivals. Although the momentum is returning now to a pre-pandemic baseline, I still think the business has built up enough positivity to leave the pandemic in a much stronger position than where it started.

Part of this is reflected by the dividend payments. The business had cut the dividend briefly during the pandemic, but now it’s back and enjoys a dividend yield of 3.96%. Personally, I think this makes the stock appealing. Not only can I pick up income, but if the share price moves higher in coming years then my ending profits will be in excess of just the current dividend yield.

However, I do need to be aware that the dividends aren’t guaranteed. Unlike some other FTSE 100 dividend picks, Royal Mail has cut the dividend before, so it could happen again. Further, pressure could be on the dividend due to the thin profit margins that the business works off. 

FTSE 100 dividends from property income

The second company I think has gone under the radar for income is Land Securities Group (LSE:LAND). It currently has a dividend yield of 4.16%, with the share price up almost 25% over the past year.

It’s the largest commercial development and investment company in the UK. Some of the plots include Xscape in Yorkshire, the Ibis at London Heathrow and some prime central London buildings.

LAND is classified as a Real Estate Investment Trust (REIT), which means that it needs to pay out a certain amount of income to investors as dividends to achieve favorable tax status. This means that the dividends should be consistent and reliable.

I think the FTSE 100 stock has gone under the radar since the start of the pandemic. A fall in rental income spooked investors in 2020, as well as the announcement that the company would selling off a chunk of assets due to the pandemic impact. The negative impact of footfall is still a risk I see, but the latest results show that the financials are bouncing back. Profit before tax for the six months to the end September was £275m versus a loss of £835m from the same period the previous year.

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.

Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended Landsec. 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

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »

Investing Articles

Are Rolls-Royce shares undervalued heading into 2025?

As the new year approaches, Rolls-Royce shares are the top holding of a US fund recommended by Warren Buffett. But…

Read more »

Investing Articles

£20k in a high-interest savings account? It could be earning more passive income in stocks

Millions of us want a passive income, but a high-interest savings account might not be the best way to do…

Read more »

Investing Articles

3 tried and tested ways to earn passive income in 2025

Our writer examines the latest market trends and economic forecasts to uncover three great ways to earn passive income in…

Read more »

Investing Articles

Here’s what £10k invested in the FTSE 100 at the start of 2024 would be worth today

Last week's dip gives the wrong impression of the FTSE 100, which has had a pretty solid year once dividends…

Read more »

Investing Articles

UK REITs: a once-in-a-decade passive income opportunity?

As dividend yields hit 10-year highs, Stephen Wright thinks real estate investment trusts could be a great place to consider…

Read more »