I’m searching for the best FTSE 100 dividend stocks to buy. And in this article I’m looking at whether or not I should buy these cheap income shares.
Each carries a dividend yield above the average of 3.5% for the broader FTSE 100. They also trade on either a price-to-earnings (P/E) ratio of below 10 times or a price-to-earnings growth (PEG) ratio of under 1.
Betting on the post-Covid bounce
Property stock Land Securities Group (LSE: LAND) was rocked by the impact of Covid-19 lockdowns on its retail and office properties. But fans of the business would say that now’s a good time to invest as the threat posed by the pandemic seems to be receding. City brokers certainly expect earnings at the firm to keep rising over the next few years at least. And as a consequence dividends are expected to continue growing, resulting in a 4.5% dividend yield for this year alone.
I’m afraid to say I won’t be buying Land Securities shares despite this bright short-to-medium-term outlook. I worry about how demand for its shopping centre and office space will fare as the digital revolution clicks through the gears. E-commerce is having a devastating effect on physical retail and the rise of remote working is upending the role of the office too.
Land Securities is addressing this problem, for example, by changing its shopping malls into multi-use areas with a greater focus on leisure. But this is coming at great cost and there’s no guarantee that it will succeed in the online shopping age.
A better FTSE 100 dividend stock to buy?
Would I be better off buying shares in BT Group (LSE: BT-A) instead then? This Footsie stock’s forward yield sits at a less-impressive 3.9% for the current year, sure. However I think its essential role in the digital revolution could actually make it a long-term winner for me. The broadband, telephone, and mobile services it provides are critical in keeping people connected.
I also prefer BT Group over Land Securities as the rising costs of living hits consumer spending power. Recent research shows how people’s demand for telecoms products has been more resilient than say for essentials like clothing. The retailers that fill Land Securities’ properties are facing a more uncertain future and could struggle to pay their rents.
That being said, I don’t fancy buying BT’s shares for my portfolio either. I still think the outlook for the FTSE 100 telecoms company is packed with danger as the UK economy cools. I’m also worried about the rising level of competition it faces. It’s not only facing a fight to hang onto and to grow its household and business customers. The company’s Openreach fibre-laying infrastructure division also has a battle on its hands. Liberty Global and Telefonica are exploring setting up a joint venture to supply 7m British homes with their own fibre, for example.
