3 beaten-down FTSE 100 income shares

When it comes to income shares, I’ve got my eye on these three dividend-paying companies in the Footsie, which look cheap to me right now.

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Recent weakness in the stock market has pulled down some income shares. Here are three of the companies I like the most right now for dividends.

A steady business

My first choice is fast-moving consumer goods giant Unilever (LSE: ULVR). With the recent share price near 3,630p, the forward-looking dividend yield for 2023 is around 4.2%. However, any business can miss its estimates because of operational challenges or other factors.

The yield isn’t as high as some FTSE 100 stocks. But I like the steady nature of Unilever’s business. And there’s some protection from competitors because the business has strong brands that consumers tend to love. However, some of the stock’s weakness this year could be because investors fear deteriorating general economic conditions ahead. And some customers could desert the brands in search of cheaper alternatives.

However, in April, Unilever delivered a robust trading statement. And looking ahead, the directors said they expect underlying sales growth in 2022 to reach the “top end” of the range between 4.5% and 6.5%.

Such positive expectations are despite a period of “unprecedented” inflation, with Unilever raising selling prices to keep pace with costs. And such actions will likely have “some impact” on the sales volumes the company can achieve.

Nevertheless, I’m tempted to take a chance with the company and add some of its shares to my long-term, income-focused stock portfolio now.

Focusing on electricity infrastructure

I also like energy business National Grid (LSE: NG). The shares have been near 1,082p recently. And the forward-looking dividend yield is around 5% for the trading year to March 2024.

The company’s multi-year dividend record is solid but the business does carry a lot of debt. And the incoming cash flow must service interest payments for borrowings as well as dividend payments to shareholders. So far, that’s a trick National Grid has managed to perform.

But the industry often faces tough regulatory scrutiny. And one risk for shareholders is that regulatory capital expenditure requirements could escalate. If that happens, the company’s ability to pay shareholder dividends could diminish.

However, I like the way National Grid has been repositioning operations to focus more on electricity infrastructure. That seems like the right approach at the right time to me. 

So I’d be happy to embrace the risks and add some National Grid shares to my diversified income portfolio today.

A fairer valuation

My third choice is investment platform provider Hargreaves Lansdown (LSER: HL). In recent years the valuation has de-rated down. And that’s from what used to be a racy set of numbers reflecting the fast-growing nature of earnings. But these days, growth is more pedestrian. 

However, I see the business as a steady enterprise potentially capable of paying reliable shareholder dividends. Indeed, the multi-year compound annual growth rate of the dividend is running just below 10%. And with the recent share price near 789p, the forward-looking dividend yield is around 5.2% for the trading year to June 2023.

Hargreaves Lansdown operates in a competitive sector, and there are economic headwinds causing some of its customers to scale back their investing. But I’d embrace the risks and add the stock to my long-term portfolio in my Stocks and Shares ISA.

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 assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown and Unilever. 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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