What are the top FTSE 100 dividend shares to buy now?

FTSE 100 dividend shares continue to reward investors, but which are the best to buy now? Zaven Boyrazian investigates.

| 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.

Passive income text with pin graph chart on business table

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.

Despite all the turmoil in the UK economy and the stock market in general, several FTSE 100 dividend shares are still rewarding loyal investors. As of July, the index was delivering a yield of 3.7%. And while I could just buy an index tracker to tap into this passive income opportunity, picking individual stocks opens the door to far better income prospects.

With that in mind, let’s look at what I think are the best dividend shares to buy now.

The best home improvement dividend shares?

With the housing market expected to suffer a slowdown in 2023, investing in home improvement may seem like an odd choice. But this may not be as disastrous as it looks on the surface. The average house age in the UK hit 32 years at the end of 2021. And with properties getting older, the demand for renovations and repairs is rising.

That’s excellent news for Howden Joinery Group (LSE:HWDN). The FTSE 100 firm is a leading expert in designing fitted kitchens, along with other house renovation offers, working directly with tradesmen through its network of 750+ depots.

It’s not the fastest-growing enterprise out there. But revenue has been growing at a double-digit rate these past five years. And with profit margins expanding as management improves its operational infrastructure, earnings are growing even faster.

All this points to reliable dividend shares in my experience. And while the yield is only 3.14%, management’s buyback programme has reduced the number of shares outstanding by around 1% a year. That brings the effective yield to a more impressive 4.14%.

While the business generates most of its income from home renovation, new-builds do contribute to the bottom line. And a housing slowdown could therefore have a tangible impact on earnings if homebuilders wind down construction efforts.

Nevertheless, as a long-term investor, this business seems like a fine addition to my income portfolio, even with this risk.

A flagship FTSE 100 pharmaceutical firm

Another industry I feel isn’t likely to disappear anytime soon is healthcare – specifically pharmaceuticals. Researching and developing new drugs to bring to market isn’t exactly easy, nor is it cheap. Fortunately, that’s less of a problem for Hikma Pharmaceuticals (LSE:HIK).

The group is a world-leading generics business. That means instead of focusing primarily on developing new treatments, it recreates drugs that have come off patent to improve both availability and affordability for patients.

Lately, these dividend shares haven’t been the best performers, with the stock price tumbling 44% over the last 12 months as competition in the US heats up. While that’s a bit of a concerning sign, investments into its injectables and branded divisions seem to be paying off in terms of growth. This is expected to accelerate following its latest acquisitions.

To me, this looks like a buying opportunity for my portfolio, despite the competitive challenges. Today, the dividend yield stands at 3.26%. But paired with its ongoing share buyback programme, that yield rises closer to 4.1%.

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.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals and Howden Joinery Group. 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

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

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

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »