Most investors buy FTSE 100 dividend stocks expecting a steady return. The large-cap blue-chip stocks aren’t really known for their explosive capital growth.
Indeed, they tend to be mature businesses which produce a steady stream of cash that can be returned to investors. Unfortunately, the trade-off here is that these companies don’t tend to achieve much in the way of earnings growth, which can hold back the performance of their shares.
However, there are a handful of FTSE 100 dividend stocks I reckon could explode in value in 2021.
FTSE 100 dividend stocks
When it comes to FTSE 100 dividend stocks, two companies stand out in particular as being deeply undervalued at present. These are telecommunications giants Vodafone and BT.
Granted, BT is no longer the dividend champion it once was. The company was forced to cut its payout earlier this year. Nevertheless, management is planning to restore the payout in the near term, and I think this could be a significant positive catalyst for the stock.
Vodafone has maintained its dividend throughout the crisis. The yield currently stands at around 6.3%. But the company’s stock price doesn’t reflect this level of income. The shares continue to trade close to a multi-year low. The same is true of shares in BT.
I think this is unwarranted. These FTSE 100 dividend stocks have fared better than most in the pandemic, as they’ve continued to provide vital services for their customers. I think the market has overlooked this fact, but this could change in 2021 as the recovery begins. And when it does, I reckon shares in Vodafone and BT could explode higher as investors rush to buy back into these two defensive income stocks while they trade at depressed levels.
Blue-chip income
Investors also seem to have been avoiding shares in GlaxoSmithKline. This company has suffered a drop in sales this year as global vaccination programmes were postponed at the height of the pandemic. The programmes may have been delayed, but they haven’t been eliminated forever. They should resume next year when the world returns to some sort of normality.
That suggests to me Glaxo’s earnings and sales could jump next year. And that may lead to a substantial increase in the company’s stock price. In the meantime, shares in the pharmaceutical giant currently support a dividend yield of around 4.5%.
HSBC used to be one of the most sought-after FTSE 100 dividend stocks. Unfortunately, the lender was banned from paying dividends to investors by regulators earlier this year. That was the right decision at the time. Regulators have now declared banks can resume dividends in the new year.
I reckon HSBC will jump at the chance to make a distribution because management was already pushing for a change in the rules. And when the company resumes payouts, I reckon the stock will jump substantially from current levels, building on a substantial rally that’s taken place over the past few months. City analysts have pencilled in a potential dividend yield of 5.5% for next year.
