If you’re similar to me, hitting September feels like the beginning of the end of the year. Christmas is coming, after all. In reality, there are still four months to go. This means there’s plenty of time to generate income and profit from investing in cheap FTSE 100 dividend stocks this month.
Arguably, now that the stock market crash of March is behind us and a second crash hasn’t happened, we have a clearer picture in September of where best to invest. We’ve had a lot of firms releasing earnings for the first half, so we can pick and choose between the best stocks from the FTSE 100 index.
FTSE 100 dividend stocks pay out income via dividends to investors. Given the pandemic this year, a large number of FTSE 100 firms cut their dividends to retain cash. But if you can target firms that are still paying out a dividend, and are trading at a discount too, then you could get the best of both worlds from your investments.
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My 3 top cheap dividend stocks
Hargreaves Lansdown is a UK-based financial services firm. It mostly focuses on stockbroking, allowing retail clients to buy and sell stocks and mutual funds. Given the volatility we’ve seen over the course of the year, the firm has benefited from being the middleman of client activity. In the latest trading update for the 2020 financial year, the firm showed an increase in annual pre tax profit of 24%! As a result, the dividend paid out to investors was also increased. The dividend yield sits at 2.35%, but there’s potential for share price gains. At 1,600p, it’s still comfortably below the highs seen in January.
Investors may look at the dividend yield of Hikma Pharmaceuticals of just under 1.5% and complain it’s too low to invest in. It isn’t the dizzying double-digit yields we saw from some stocks last year, but we need to compare this on a relative basis. The Bank of England base rate is at 0.1%. So anything beating this is a positive. As well as the dividend income, I also think the stock is cheap and could outperform. A recent trading update showed that earnings actually rose in the first half of 2020. Pre-tax profit was up 21% for H1. So to be able to pick up income and hopefully ride the wave of a rallying share price could be a good investment.
I’ve written a lot about Coca-Cola HBC recently. The stock fits into a lot of categories that appeal to investors. It’s a defensive stock that can be used to protect against a recession. And the recession and potential second stock market crash are what sensible investors should be aware of. It’s also a cheap FTSE 100 dividend stock for income investors. The yield sits around 2.55%, but the stock price is around 28% lower than where it started the year. So this could potentially be a great stock to own not only for the dividend income, but also for the share price upside.
Buy now, or later?
Dividend yields change every day with share price movements. So if you’re happy with the above yields, it makes sense to lock them in. After all, if 2020 has taught us anything, it’s that situations can change very quickly!
