2 top FTSE dividend shares I’d buy for regular income in 2023

2022 has thrown up a host of top dividend stocks trading at low valuations. Here are two I’ll consider buying in the New Year.

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There are lots of great FTSE dividend shares trading at bargain prices right now, but I cannot afford to buy them all. But two stocks have battled their way to the top of my watchlist for 2023. Once I have cash to spare, I will swoop.

The last five years have been bumpy for the FTSE 100 so I am impressed to see how well Anglo American (LSE: AAL) has performed. While the index as a whole trades just 2.2% higher in that time, this diversified miner is up a thumping 142%. It is even up 17.71% in the last 12 troubled months.

Hunting for dividend shares

Despite this, the share price looks dirt-cheap, trading at just 5.6 times earnings. It currently yields a bumper 7.1%, covered 2.5 times by earnings. As ever, there is no guarantee it will continue at that level. Forecasts suggest it could fall to around 5%, but that still looks attractive to me.

Mining stocks have benefited from this year’s surge in commodity prices, while being dogged by fears that Chinese Covid lockdowns and a global recession may hit demand. This could go either way in 2023, but I am investing with a 10- or 20-year view.

With that in mind, today’s low valuation looks like an attractive entry point. As an added bonus, its De Beers diamond unit has been performing strongly.

Anglo American comes with risk attached, as does every stock, yet I feel the outlook is promising, once we see the back of the recession. Electrification and the shift to renewables will boost demand for copper. I will reinvest my dividends to buy more stock until we have lift off.

I would balance this by investing in FTSE 100 paper packaging products group DS Smith (LSE: SMDS), which in contrast has struggled. Its share price is down 38.74% measured over five years, and 17.28% over the last year.

The rise of e-commerce has boosted demand for its corrugated packing but rising raw material and energy prices have driven up input costs. EPS have fallen in three of the last five years.

I like this solid income stock

Management suspended the dividend during the pandemic but it returned in 2021, and currently offers a solid 4.9% yield, covered twice. DS Smith looks good value following its recent share price troubles, trading at 10 times earnings. I am encouraged to see it is expected to report at least £400m of underlying operating profit in Thursday’s half-year results.

DS Smith has pricing power in a tough market, something not every company can boast right now. It generates plenty of cash which should hopefully sustain future dividend growth in 2023 and for years after that. On the other hand, the cost-of-living crisis could hit demand as consumers feel the squeeze.

The £4.25bn group has benefited from the falling pound, as it generates 85% of its sales overseas. However, sterling is now on the up and that could turn into a headwind. Yet I would still buy DS Smith, encouraged by its strong balance sheet. Net debt is just £1.5bn, down from £1.8bn last year. That is a comfort as interest rates rise.

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.

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has recommended DS Smith. 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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