The Motley Fool

3 top FTSE 100 dividend buys for 2017

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.

If you’re new to investing, you may believe that steeply rising share prices are the key to building wealth. While this certainly helps, regularly receiving and reinvesting dividends from well-run, resilient companies whose stock appreciates more gradually can be just as profitable over the long term.

So, at the end of the first week of trading in 2017, here’s a selection of businesses for more risk-averse income hunters who prefer to search for decent yields at the market’s top table.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Dependable dividends

Mondi (LSE: MNDI) enjoyed a positive 2016. Changing hands for 1,223p back in January of last year, shares have since climbed by 35%, leaving the £8bn cap packaging and paper company offering a yield of just over 3%. This may seem rather average but seasoned dividend hunters will be aware that consistent dividend growth can be just as good as a sizeable yield. On this front, Mondi scores well with a long history of hiking its bi-annual payouts. I predict this will continue, particularly as the company expects to benefit from higher selling prices in 2017.  

After a fairly depressing last 12 months — during which its shares declined by 20% — investors in ITV (LSE: ITV) will be hoping for a little more joy in 2017. In the meantime, there’s a fairly juicy 4.2% yield on offer. That’s over 3% higher than the rate offered by the best cash ISA currently available.

With decent levels of return on capital and high operating margins, the £8.2bn cap gives the impression of being a quality company, albeit one whose performance is tied to the prevailing economic conditions. While concerns over declining revenue from advertising are understandable, the company seems committed to reducing costs and increasing sales from its online operations. Those persistent takeover rumours also refuse to go away.

Despite being on the receiving end of last June’s political fallout, shares in £15bn cap insurance and investment management giant Legal & General (LSE: LGEN) have rebounded strongly. Those who embraced the stock in the chaotic few days that followed the shock vote would have enjoyed a 50% rise by the end of the year.

Sure, there could be more volatility in the year ahead but history shows that a company of Legal and General’s stature will be able to weather the storm. While negotiations with the EU continue, there’s a chunky 5.8% yield to comfort investors.  

Run for cover

Are there shares offering higher yields in the FTSE 100? Absolutely. So why not select them? It’s simple. To distribute dividends to shareholders, a company’s finances need to be robust. This is why it’s so important to refrain from chasing unrealistically high yields (which often signal that a business is in trouble) and to check the level of dividend cover. That means check the ratio of net income over the dividend paid. For payouts to be safe, cover really needs to be as high as possible (and definitely more than one). With cover of 2.4, 1.9 and 1.5 respectively, the yields from Mondi, ITV and Legal & General all look secure for now. 

As well as stopping themselves from automatically buying the biggest payers, those seeking income should also check that their portfolios never contain more than a couple of companies operating in the same market. Only by diversifying — both geographically and by industry — can investors mitigate the impact of one or several of their holdings reducing or completely cutting their regular distributions.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Paul Summers has no position in any shares mentioned. The Motley Fool UK has recommended ITV. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.