Lloyds isn’t the only monster dividend stock in the FTSE 100 I’d buy before Christmas

Edward Sheldon looks at two FTSE 100 (INDEXFTSE: UKX) stocks yielding over 6%, including Lloyds Banking Group plc (LON: LLOY).

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It’s only a little over a week until Christmas now, and at this stage, it looks as if we won’t see a Santa Rally. Already, the FTSE 100 has declined over 2% this month and the index is down again this morning.

Yet for long-term investors, the lack of a rally isn’t necessarily a bad thing, because it means more opportunities to load up on high-yielding stocks. With that in mind, here’s a look at two monster dividend stocks I’d buy before Christmas.

Lloyds Bank

It hasn’t been a great year for the Lloyds (LSE: LLOY) share price, as Brexit uncertainty has taken its toll on the stock. Back in January, the shares were trading at 72p, however, now they’re changing hands for just 52p.

Clearly, there are risks to the investment case for Lloyds. For starters, there’s a great deal of uncertainty as to how Brexit will impact the UK economy and UK house prices (the Bank of England recently said house prices could fall 30% in the event of no deal). Then, there is the 29 August 2019 PPI claims deadline, which is also spooking investors. Third, there’s also the threat of challenger banks and innovative fintech companies, which are looking to grab market share. Looking at these risks, I can understand why investors might prefer to look elsewhere for dividends right now.

That said, at 52p, you have to wonder if these risks are incorporated into Lloyds’ share price. Right now, the shares trade on a P/E of just 6.7, which certainly looks cheap, in my view, and they also offer a prospective yield of a massive 6.2%.

Back in late October, Lloyds reported a solid set of Q3 numbers and reaffirmed its financial targets for 2018. And just last week, ratings agency Fitch affirmed the bank’s outlook as stable, with an ‘A+’ credit rating, and stated that due to Lloyds’ capitalisation, funding and liquidity, it should be able to withstand a “moderate weakening of the economic environment associated with Brexit.”

As such, I’m staying positive on Lloyds for now. I think the yield on offer is an opportunity.


Another FTSE 100 dividend stock that I believe looks very interesting now is Aviva (LSE: AV). Like Lloyds, its share price has fallen significantly this year, and that means it curently offers a huge dividend yield.

There are a number of reasons why Aviva shares have fallen in 2018. Firstly, the company does not have a CEO at present, after Mark Wilson stepped down in October. A lack of leader adds a little uncertainty to the investment case. The shares have also been hit by talk of more regulation in the equity release lifetime mortgages (LTM) market. Third, the stock’s domestic focus has impacted sentiment negatively.

Yet to my mind, the shares just look too cheap right now on a P/E of 6.6, especially when you consider that City analysts expect a 10% dividend hike this year which means the prospective yield on the stock is now 8%.

Interestingly, out of the 18 brokers covering Aviva, seven currently rate the stock as a ‘strong buy’ while another seven rate it as a ‘buy.’ Furthermore, RBC even raised the stock to ‘top pick’ from ‘outperform’ recently. Given this bullish sentiment from the broker community, I think now could be a good time to take a closer look at the stock.

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.

Edward Sheldon owns shares in Lloyds Banking Group and Aviva. The Motley Fool UK has recommended Lloyds Banking 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.

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