£3k to invest? 3 cheap FTSE 100 dividend stocks I’d buy to retire early

The stock market crash has left these three FTSE 100 dividend stocks trading at attractive valuations with good income potential, says Roland Head.

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This year’s stock market crash has hit share prices hard. Many of us are sitting on losses. But I believe this sell off has created some great buying opportunities for long-term investors. Today, I’m going to look at three FTSE 100 dividend stocks which look too cheap to me at current levels.

Demand will keep rising

One company that has said very little so far about the impact of the Covid-19 pandemic is Vodafone Group (LSE: VOD). The telecoms firm’s strong cash flow and high yield means it’s often seen as a classic FTSE 100 dividend stock.

Vodafone’s latest update was in February, covering the final three months of 2019. Management reported an extra 500,000 European mobile contract customers. It also said plans to cut costs and improve network utilisation were on track.

Since then, Vodafone CEO Nick Read has continued to sell small non-core operations and prepare for the flotation of the group’s radio tower network later this year. The proceeds from this sale should help Read to cut the group’s borrowings, which are currently a little high.

Back in February, the company left its guidance for the year to 31 May unchanged. My sums suggest the 7% dividend yield should be covered by free cash flow. I expect demand for mobile and broadband data to continue rising after the pandemic eases. In my view, this is a good opportunity to buy this FTSE 100 dividend share.

A long-term winner?

My next pick is commercial property REIT British Land (LSE: BLND). This group’s London offices and major shopping centres are currently much emptier than usual, due to the lockdown.

Investors are worried that demand for stores and offices will fall after the pandemic. I agree that there might be some changes, but I think these will be smaller and more gradual than we might expect.

British Land’s portfolio was valued at £11.7bn at the end of September, giving a net asset value of 856p per share. Although I expect this to fall, I think the last-seen price of 375p is too cheap.

In my view, a lot of bad news has already been priced into this FTSE 100 dividend stock. I expect British Land to make a gradual recovery and a return to dividend payments over the next 12 months. I think this is a good time to buy.

1 FTSE 100 dividend stock I’d buy and hold forever

Family firms often have conservative balance sheets and very reliable dividend histories. The firm’s owners — the family — often depend on dividends for their income. They’re careful to hire management who will run the business sustainably, with a long-term focus.

In my opinion, City asset manager Schroders (LSE: SDR) is a classic example of this type of dividend stock. This FTSE 100 firm has been trading for more than 200 years and hasn’t cut its dividend for at least 30 years, which is as far back as I could find records.

Schroders’ share price has fallen in the stock market crash. The stock now trades on just 16 times forecast earnings. If you buy the non-voting Schroders (LSE: SDRC) class of shares, you can access a 5.4% dividend yield. I see this as one of the best dividend stocks in the FTSE 100 and would like to add the shares to my own portfolio.

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 considered so you should consider taking independent financial advice.

Roland Head owns shares of British Land Co. The Motley Fool UK has recommended British Land Co and Schroders (Non-Voting). 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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