Building a second income? 2 FTSE 100 dividend stocks I’d buy and hold today

These two FTSE 100 (INDEXFTSE:UKX) dividend stocks could deliver impressive income and capital growth, in Peter Stephens’ opinion.

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While the FTSE 100 resources industry has a history of volatility and uncertainty, there could be a number of stocks that offer a mix of impressive income and capital growth prospects.

Although there are risks facing the world economy from threats such as the US/China trade war and geopolitical difficulties in a number of regions, some stocks appear to offer low valuations that factor in such challenges.

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As such, the risk/reward opportunities from FTSE 100 resources stocks could mean that now is a good time to gain exposure to these two large-cap shares.

BP price threat?

The recent pullback in the oil price could mean the short-term financial prospects for BP (LSE: BP) come under pressure. The oil and gas company is, of course, highly dependent on the price of black gold, which is an ongoing threat to its financial prospects.

In the short run, further declines could be ahead. Weaker demand from a slowing world economy could become the norm should further tariffs be placed on imports by countries such as the US and China.

However, with the stock now trading on a price-to-earnings (P/E) ratio of just 11, it seems to offer a wide margin of safety. Furthermore, a dividend yield of 5.8% that’s covered 1.5 times by profit indicates it may deliver an impressive income investing outlook over the long run.

With BP having a number of new projects in the pipeline while also making progress in integrating recently-acquired assets, the prospects for the business appear to be improving after a challenging decade. Although a falling oil price would hurt its financial outlook, the company’s risk/reward ratio appears to be relatively appealing in comparison to the wider FTSE 100.

Rio Tinto uncertainty?

The uncertain outlook for the world economy may also cause higher volatility for iron ore miner Rio Tinto (LSE: RIO). With China the biggest importer of iron ore in the world, accounting for almost two-thirds of global imports, the threat of a slowdown in its economy from a trade war could mean industry operators experience an uncertain period.

As with BP, though, the Rio Tinto share price appears to offer a wide margin of safety. It currently trades on a P/E ratio of 13.8, which suggests that it offers fair value for money at the present time.

In terms of its income investing potential, the stock has a dividend yield of 4.4% from a payout that is covered 1.7 times by profit. While this may be only in line with the yield of the FTSE 100, the long-term growth potential for China and other emerging economies could mean the mining sector delivers impressive financial performance.

Clearly, there may be less volatile and more reliable large-cap income shares available elsewhere. But, in terms of its long-term outlook, Rio Tinto could be a worthwhile means of diversifying an income portfolio.

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Peter Stephens owns shares of BP and Rio Tinto. The Motley Fool UK has no position in any of the shares mentioned. 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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