The Motley Fool

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

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.

Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Image source: Getty Images

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.

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!

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.

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

Peter Stephens has no position in any of the shares mentioned. 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.

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.