3 hot FTSE 100 dividend stocks I’d buy as the stock market crashes

The FTSE 100 (INDEXFTSE: UKX) is full of top dividend shares, and the market crash has now made them all look a lot more tempting.

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100 is up 3% on the day as I write, but since 19 February it’s still down 17% on coronavirus fears. And I reckon that’s pushed FTSE 100 dividend stocks to the fore.

We’ve seen similar falls before, and the UK’s top index has always come bouncing back. I don’t expect this time to be any different, and I’m looking for some of the top dividend stocks that have become even cheaper. Here are three that I like the look of.

Insurance dividends

Aviva (LSE: AV) has fallen 21% over the period. Perhaps that’s not surprising for a FTSE 100 dividend stock in the life insurance business when a potential human disaster is looming.

But Aviva has just reported a record operating profit of £3.2bn, and the shares are sitting on what looks to me like a crazily low valuation.

We’re looking at P/E valuations of under six on current forecasts. Now, those forecasts might be adjusted downwards as the coronavirus pandemic develops. But even so, I’m seeing a lot of bad news already built into that pessimistic valuation — and I think it’s more bad news than we’re likely to see.

And just look at the dividend. Aviva’s dividends have been growing steadily, and the share price drop has pushed the forecast yield up to 10%. Aviva looks like one of the best FTSE 100 dividend stocks right now, and I might buy some more.

Defensive dividends

I’ve been keen on BAE Systems (LSE: BA) for some time. It’s in a sector that can have its ups and downs over the short term, but long-term demand remains strong. You can see the erratic short-term nature of sentiment towards the business too, by looking at the share price.

But we can see volatility as a provider of buying opportunities when share prices are down. And BAE’s shares are in a downswing now, along with everything else. We’re seeing a 16% fall since the coronavirus panic has been going, and I think that’s pushed BAE shares firmly into buying territory.

EPS has been modestly but steadily growing, and there are two more years of 5%-7% rises predicted. I don’t really see how coronavirus is going to adversely affect that, and I reckon BAE’s forecasts are perhaps among the most dependable out there.

The forecast dividend yield is up to 4.3% now. And covered twice by forecast earnings, I see this FTSE 100 dividend stock as another to snap up for long-term income.

Market dividends

If markets are in a turmoil and you’re not sure what to buy, why not just buy the market? You could do that by buying an index tracker, but in this case I just mean buy companies whose business it is to buy and sell the market. I’m thinking of St James’s Place (LSE: STJ) specifically.

The wealth manager’s share price is down 23% during the panic. I’m guessing that’s because investors fear any FTSE-related losses will be geared downwards and profits will be hit disproportionately. If the stocks that St James’s Place holds should fall, the firm will lose out on the charges it can levy.

There’s a 7% EPS drop on the cards, and it could be a bit worse than that, so that’s something we need to be prepared for. But St James’s Place has a long-term progressive dividend policy. And if the 2020 dividend meets expectations, it would yield 5.7%.

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.

Alan Oscroft owns shares of Aviva. 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.

More on Investing Articles

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

How I’d invest my first £20k ISA to target £4,900 a year from dividend shares

Looking for dividend shares in a new Stocks and Shares ISA, and want diversification too? Here's how I'd go about…

Read more »

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

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »