The Motley Fool

3 FTSE 100 dividend stocks I’d buy and hold long term

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.

FTSE 100 dividend stocks play a huge part in how I plan my portfolio for a stable second income. And I think it is vital to identify companies with a shareholder-first approach. For this, I look at historic yield and how a company uses excess cash when I’m deciding if a dividend stock is worth investing in.

With the FTSE 100 index reaching new highs, the market looks very attractive right now. I think the index offers some excellent options for my income portfolio. Here are three UK dividend stocks I would invest in today and hold for a very long time.

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!

Digging deep into dividends

Mining company Rio Tinto (LSE:RIO) offers an incredible 10.4% dividend yield at its current share price of 4,760p. This huge payout is a result of a special one-time dividend in 2021. The good news is, the company amassed a huge cash reserve of US$13.6bn last year, according to the first-half (H1) 2021 report. And current H1 net cash figures stand at US$3.1bn even after the US$6.4bn shareholder payout. Given the sizeable excess, analysts believe that the company could maintain a 9.5% yield next year as well.

Rio owns huge lithium reserves, making it a big player in the global electronic vehicle (EV) revolution. Lithium is an integral component the rechargeable batteries used in EVs. This is why I think Rio’s revenue could grow significantly over the next decade if this EV push continues.

But there are some concerns surrounding Rio. Its Jadar lithium mine in Serbia was subject to scrutiny after protests highlighted the possible environmental impact. Also, fluctuating commodity prices make it hard to establish stable revenue figures. But, it is hard for me to overlook the potential of the sector and mammoth dividends which is why Rio is on my FTSE 100 dividend stock watchlist.

History of dividend growth

British American Tobacco (LSE: BATS) and Legal & General (LSE:LGEN) are my other dividend stock picks. Both companies offer strong dividends but more importantly have a history of increasing dividends year on year.

Tobacco giant BATS offers an attractive 8.5% dividend yield and two decades of steady dividend increases. Despite its poor market performance over the last year and global decrease in tobacco sales, it earns a spot on my list. Just the yield alone makes BATS an exciting option for steady passive income. I would definitely consider a £1,000 investment in BATS shares today to grow my income portfolio.

UK insurer LGEN offers a robust 6.2% dividend yield and I think the stock is an attractive growth option for my portfolio as well. It is currently trading at 287p at a profit-to-earnings (P/E) ratio of 7.5 times. This points to a slightly undervalued stock with room for growth. Also, its yield has increased steadily for the past decade. Analysts are predicting a dividend of over 18p per share in FY21, which is a 4.5% increase from last year. 

With the whispers of another Covid outbreak, the financial sector does not look too inviting to me. The insurer could take a hit if we are forced indoors. But I think the 6.5% yield is a decent security blanket even in an unstable economy, which is why I’m putting LGEN shares on my watchlist of best FTSE 100 dividend stocks.

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

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco. 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.