2 FTSE 100 dividend stocks I’d buy for their BIG yields!

Stock market volatility has driven the yields on many FTSE 100 dividend stocks through the roof. I think these income stocks could be too good for me to miss.

| More on:

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.

Cheerful mature couple sitting and managing expenses at home.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

These FTSE 100 dividend stocks offer yields I find hard to ignore. Here’s why I’d buy them today and look to hold them for years.

National Grid

Dividend yield for this year: 5%

National Grid’s (LSE: NG) ability to continue raising dividends during Covid-19 perfectly illustrated its excellent defensive qualities. Electricity demand remains pretty constant whatever crisis comes down the line. And so the power infrastructure business enjoys excellent profits stability.

This is why City analysts expect the business to keep growing dividends this year and next too. Forecasters project rewards of 53.2p and 55p in fiscal 2024 and 2025 respectively. As a consequence, yields sit at an excellent 5% for this year and 5.2% for next.

I am concerned about how National Grid’s capital-intensive operations could hit dividend levels in the near term and beyond. I’m also keeping an eye on how climate change could drive the company’s cost base higher.

Last week, the government said network operators must “review their severe weather escalation plans, improve their communications systems, and strengthen their compensation payment mechanisms”. This follows the damage caused by Storm Arwen in the autumn.

All things considered however, not many FTSE 100 firms have the supreme profits visibility of National Grid. The critical role it plays in keeping the lights on, along with its monopoly on maintaining the UK’s electricity infrastructure, make it a top dividend stock to buy.

Barratt Developments

Dividend yield for this year: 7.8%

Barratt Developments (LSE: BDEV) doesn’t have the same non-cyclical qualities as National Grid. In theory, it faces weak sales growth, or even a top-line reversal as economic conditions worsen.

In practice however, housebuilders like these continue to thrive. There simply aren’t enough new homes to go around. And thanks to historically-low interest rates and ongoing government support, demand continues to outpace supply.

In fact, homebuilder Crest Nicholson last week upgraded its full-year earnings forecasts on the back of exceptional trading conditions. Revenues here leapt 12.3% in the six months to April. This follows Barratt’s recent update in which it predicted completions would rise between 4% and 6% this year.

Analysts expect Barratt to grow earnings 22% in the financial year to June. And they predict a 1% rise in the upcoming fiscal year too.

However I think there’s a strong chance profits here could also surprise to the upside. And I don’t think this is reflected in the firm’s low valuation. Today, the business trades on a price-to-earnings (P/E) ratio of just 6.4 times for fiscal 2023.

Regardless, City brokers think these forecasts will be enough to drive dividends sharply higher during the period. Payouts of 39.7p and 46.2p per share are predicted for this year and next respectively. So subsequent yields clock in at a 7.8% and 9.2%.

Demand for Barratt’s homes could come under pressure if the Bank of England keeps frantically raising interest rates. But, as things stand, I think the massive rewards I could receive from owning the business makes it a great FTSE 100 share to buy.

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.

Royston Wild has positions in Barratt Developments. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

Up another 6% in the last week! Is the BP share price ready to go gangbusters?

The BP share price has been on fire lately. Harvey Jones looks at what's driving the FTSE 100 stock's recovery,…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

High-flying IAG shares are up 50% in 3 months but I still think they’re too cheap to ignore!

Timing the market is almost impossible but Harvey Jones managed it when buying IAG shares in April. Can the FTSE…

Read more »

ISA coins
Investing Articles

Want to earn £1k+ in annual passive income from a £20k Stocks and Shares ISA? Consider this!

Our writer sets out some points to consider when trying to target a four-figure income from one year's Stocks and…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

3 risks to the Rolls-Royce share price, after its 979% climb

After a 979% growth in the Rolls-Royce share price, our writer still sees things to like in the business. But…

Read more »

Buffett at the BRK AGM
Investing Articles

Can Warren Buffett principles help when looking for AI stocks to buy?

Billionaire Warren Buffett has made a fortune by applying old investing principles to new industries. Can our writer learn some…

Read more »

Portrait of a boy with the map of the world painted on his face.
Investing Articles

Up 36% in 3 months! Is my nightmare purchase of Glencore shares about to come good with a vengeance?

When Harvey Jones bought Glencore shares two years ago, he didn't expect to find himself sitting on a 45% loss.…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

£1,000 invested in Lloyds shares 5 years ago is now worth…

Anyone who’s owned Lloyds shares over the last five years is probably laughing right now with impressive returns that crushed…

Read more »

A mature woman help a senior woman out of a car as she takes her to the shops.
Investing Articles

If a 50-year-old puts £500 a month into a SIPP, here’s what they could have by retirement

Investing £500 a month with a SIPP could build a pension pot worth £269,900 or quite a bit more over…

Read more »