Receiving regular cash from FTSE 100 stocks is one of my long-term investing goals. I’m sure I’m not alone in this regard, which is why I keep a close eye on the changing dividend yields and the declaration of new dividends.
If I want to buy a stock for income, it can make sense to do this before the company goes ex-dividend. Here are two to note this week.
The importance of ex-dividend dates
In layman’s terms, I need to buy a stock before a certain date (the record date) in order to be eligible to receive the next dividend payment. Usually, the day before the record date is known as the ex-dividend date. If I buy shares in the firm on this date onwards, I won’t get the next dividend: it’s too late.
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Therefore, if I have a stock on my watchlist that I want to purchase specifically for income potential, it makes sense to buy before the ex-dividend date. Otherwise, I could be waiting months before the next one comes around.
Coming up this week
BP (LSE:BP.) goes ex-dividend on 15 February. I wrote about the oil giant in detail earlier this month, following the better-than-expected full-year results.
As part of the strong results, the business declared the next quarterly dividend of $0.0727 per share. The current dividend yield is 4.71%, well above the FTSE 100 average of 3.90%.
I think now is an attractive time to consider buying BP because of the share price dip over the past year. Even with the spike following the recent results, the stock is still down 12% over the past year. Granted, there are risks, which is why the stock is down over this period. For example, one measure of profitability fell by around 50% from 2022 to 2023. The lower oil price over the course of the last year also didn’t help.
However, the lower share price helps to boost the dividend yield right now. When I look forward, I think the business is going to have a much stronger year. This is because the firm is focused on cash flow, reducing debt and initiating four new major projects around the world. These points were noted in the annual report.
A high-yielding star
Imperial Brands (LSE:IMB) is another stock that goes ex-dividend on 15 February. It’s paying a dividend of 51.82p per share, with a current dividend yield of 7.80%.
The share price is only modestly down 6% over the past year, so the high yield doesn’t come with a red flag of a plummeting stock. I think the dividend is sustainable at current levels as it is similar to the payments made over the past few years.
Of course, declining traditional tobacco demand as the world pivots away from it won’t help the firm in the long term. But what impressed me from the latest results was the 26.4% net revenue growth versus the previous year in the next generation product category. This shows me that the company can still grow and support dividend payments in the future from this revenue source.
I don’t have the money to buy both stocks this week, but they are worth considering for those with the free funds.
