For me, Imperial Brands (LSE:IMB) and Hargreaves Lansdown (LSE:HL) are two of the top FTSE 100 dividend shares to buy in April. Stocks offering passive income in the form of dividend payments form a core part of my portfolio. And this is particularly true right now. With UK inflation hitting 6.2% in February, I’m keen to negate its impact on my portfolio. Passive income stocks are a great way to do this.
One reason why I think these stocks are a good buy now is that they’re both trading at a discount. I’m also confident that they both have long-term potential.
Imperial Brands
The Bristol-headquartered tobacco firm is currently offering an impressive 8.3% dividend yield. That’s far above the FTSE 100 average. While it is good to be sceptical of high dividend yields, Imperial Brands has an impressive track record when it comes to paying shareholders. The company has paid a dividend for each of the last 25 years.
What’s more, the firm is currently trading at £16.74 a share, down from a year high of £18.21. This is also massively down on the pre-pandemic price. In 2016, a single share was valued at over £40.
It’s also trading with a price-to-earnings ratio of just 6.75. To me, that looks dirt cheap, especially for an established FTSE 100 stock. Naturally, concerns about the future of the tobacco industry are built into this.
The share price also belies some impressive performance data in recent years. In each of the last five years, it has grown its revenue, reaching £32.7bn in 2021. This was reflected in pre-tax profit of £3.2bn. This was the best performance in the past five years and nearly double the £1.69bn reported in 2019.
Naturally, there are risks. The forthcoming sale of its Russian assets will surely impact revenue. Meanwhile, there’s concern about the tobacco industry as people becoming increasing wary of its health impact. Looking to the future, Imperial said that its next-generation products’ (NGP) trials are going well. Despite headwinds, I think it looks like a good addition to my portfolio.
Hargreaves Lansdown
The Hargreaves Lansdown share price fell by around a quarter earlier in February as the firm reported a 20% drop in profit before tax for the six months ended December. The company had benefited from the lockdown trading boom, but profits fell during a calmer 2021. Its report stated that “calmer markets…led to more normalised share trading levels”.
The company’s dividend yield certainly wasn’t world-beating, but due to the share price fall, if I buy today, I can expect a respectable 3.7% yield. This, along with some upside potential, makes me think I should be buying more for my portfolio.
The investment platform is the market leader in the UK. It’s also very profitable and saw sizeable increases in revenue in each of the five years to 2021.
However, the Bristol-based firm recently launched a plan to upgrade its technology and provide new forms of insight for clients. The company intends to spend an extra £175m over the next five years. While the changes seem logical, we may not see the impact for some years. If the changes don’t work, it could make the firm less profitable than it is today.
