The FTSE 100 has had a good run this year… so far. Year to date, the index is up around 10%. Yet even after this rise, I’m still seeing plenty of buying opportunities. Here’s a look at two dividend stocks I’d be happy to buy for my portfolio today.
Unilever
One stock that I believe offers value right now is consumer goods champion Unilever (LSE: ULVR) which owns a top portfolio of brands including Dove soap, Ben & Jerry’s icecream, and Lipton tea. This is a stock that often trades a relatively high valuation due to the fact that it’s such a consistent performer.
Yet recently, the shares have pulled back by nearly 15% on the back of sterling strength and weaker-than-expected Q3 sales in the emerging markets. I see this pullback as a buying opportunity.
There are a number of things I like about Unilever. Firstly, it’s relatively recession-proof. People buy its products whether the economy is booming or deteriorating. Secondly, it’s very profitable. Over the last five years, return on equity (ROE) has averaged 43%, meaning it’s one of the most profitable companies in the entire FTSE 100. Thirdly, with more than 50% of its sales coming from the emerging markets, there’s an attractive long-term growth story. As wealth across countries such as India and China continues to rise, more people should be able to afford the group’s products.
Today, Unilever shares trade on a forward-looking P/E ratio of 19, using next year’s consensus earnings forecast. I think that’s quite reasonable for a company of Unilever’s ilk. I see the stock as a ‘buy’ at current prices.
DS Smith
Another FTSE 100 dividend stock I like the look of right now is DS Smith (LSE: SMDS). It specialises in manufacturing cardboard boxes (the type Amazon deliveries come in).
Cardboard boxes may sound a little boring, but don’t tune out just yet. The reason I like DS Smith can be summed up in three words: the digital boom. Today, nearly 1.8bn people shop online globally with sales amounting to $3trn. In 2018, Amazon generated sales of $233bn alone.
Yet due to advances in technology (5G, data analytics, augmented reality, delivery drones etc) and rising smartphone penetration, global e-commerce sales are likely to climb much higher in the years ahead.
According to Statista, we could be looking at total retail e-commerce sales of a staggering $6.5trn by 2023. Given that DS Smith makes packaging for online deliveries, I think it should benefit from this extraordinary industry growth.
DS Smith shares tanked late last year on the back of fears over a global recession and they’re yet to fully recover. Currently, the forward-looking P/E ratio is just 10.3. At that valuation, I think the stock is a steal. There’s also a nice 4.7% dividend yield on offer.
All things considered, I believe the stock is priced to ‘buy’ right now.
