Have £2,000 to invest in the FTSE 100? Here are 2 dividend shares I’d buy in an ISA today

These two FTSE 100 (INDEXFTSE:UKX) shares could offer impressive income returns, in my view.

| More on:

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.

While the FTSE 100’s dividend yield of 4.5% is highly appealing, it’s possible to generate a significantly higher return across a wide range of stocks.

A number of the index’s members are proving to be highly unpopular with investors at the present time. Although they may face an uncertain near-term outlook, they could deliver impressive income returns over the long run.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

With that in mind, here are two FTSE 100 shares that could offer an impressive dividend investing outlook. As such, they may be worth buying right now.

Severn Trent

Water and wastewater services company Severn Trent (LSE: SVT) released a trading update on Wednesday which showed it’s on track to meet guidance for the full year. Progress is being made in areas such as energy self-generation, as well as improving the customer experience.

Although utility stocks have historically offered defensive investing appeal, regulatory and political risks have contributed to weak investor sentiment in recent months. Severn Trent, for example, has recorded a share price decline of around 20% in the last three years. This trend may continue in the near term, with an uncertain operating environment having the potential to weigh on its future prospects.

Despite this, the company could offer long-term income investing appeal. It has a 5% dividend yield, which is historically high for the stock. Having a solid track record of dividend growth, as well as a relatively attractive price-to-earnings (P/E) ratio of 14, it may provide inflation-beating income returns over the long run.

Sainsbury’s

Having declined by around 40% in the last year, Sainsbury’s (LSE: SBRY) now appears to offer a wide margin of safety. Clearly, the company has experienced an uncertain period. Its failure to merge with Asda seems to have significantly disappointed investors, while its strategy and management team have come under pressure from a range of investors in recent months.

However, the valuation of the stock could present an investment opportunity. Currently, it trades on a P/E ratio of just 9. This suggests investors may have priced in the risks faced by the business in what is a challenging wider retail sector. As well as weak consumer confidence and an increasing shift to e-commerce sales, Sainsbury’s also faces a high level of competition from no-frills operators such as Aldi and Lidl.

While these threats could hold back its share price in the near term, its long-term income prospects could be appealing. It currently yields 5.7% from a dividend that’s covered 1.9 times by net profit.

With net profit forecast to grow by 4% in the current year, it’s clearly not the fastest-growing stock in the FTSE 100. But, equally, its prospects may be more attractive than the stock market is currently pricing in. This could present a good buying opportunity for long-term investors.

More on Investing Articles

Woman looking at a jar of pennies
Investing Articles

I think the JD Sports share price is a bargain. Here’s why

Our writer explains why the JD Sports share price has led him to buy more for his portfolio.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is this tech stock one of the best shares to buy now?

Jabran Khan is on the hunt for the best shares to buy now for his holdings and takes a closer…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

3 top FTSE 250 shares to buy right now

I think the FTSE 250 is offering some great dividend and growth shares at the moment. And there are plenty…

Read more »

Happy retired couple on a yacht
Investing Articles

This growth stock has seen its shares pull back! Should I buy now?

When a growth stock sees its share price drop, I look carefully to see if I could pick up a…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How to identify the best income shares like this one

Income shares vary in quality but this approach keeps me from making some of the worst howlers with dividend investing.

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

If I’d invested £1k in Tesla shares a year ago, here’s how much I’d have now

If Jon Smith had bought Tesla shares a year ago, he'd be in profit. But he has some concerns for…

Read more »

Twenty pound notes in back pocket of jeans
Investing Articles

Should I buy tobacco shares now for big dividends?

After a possible setback for electronic cigarettes, our writer explains why he would still buy tobacco shares for his income…

Read more »

a couple embrace in front of their new home
Investing Articles

3 FTSE shares I’m buying with the Help to Build scheme!

Last week, the government launched a new, Help to Build scheme. So, here are three FTSE shares that could benefit…

Read more »