I’m searching for the best FTSE 100 dividend shares to buy in 2023. Could these popular ones boost my passive income?
J Sainsbury
2022 has been a bruising year for the UK’s established grocers like Sainsbury’s (LSE:SBRY).
Takings have been hit hard by falling demand for food and other essentials. At the same time their margins have shrunk as they’ve slashed prices to tempt shoppers through their doors.
A subsequent fall in the J Sainsbury share price now leaves the grocer looking extremely cheap on paper. At 218p per share, it trades on a price-to-earnings (P/E) ratio of 10.5 times. The forward dividend yield meanwhile clocks in at a market-beating 5.7%.
Pleasingly, the cost-of-living crisis is tipped to moderate during the second half of 2023. So shoppers could have more money to spend in Sainsbury’s.
But the business still has to grapple with the long-term problem of rising competition, a battle it’s shown little sign of winning. Its market share has dropped 1.7% over the past 10 years as discounters Aldi and Lidl have expanded.
Earlier this month, Sainsbury’s announced plans to invest another £50m to bring down prices. As a potential investor, I want to see the firm do more to defend itself. Profits-sapping price cutting hasn’t worked yet and I think the business is pouring away good money after bad.
The FTSE 100 firm also faces prolonged staff, energy and product cost inflation that could persist long beyond 2023. This low-cost share carries far too much risk for my liking.
Rio Tinto
The mood surrounding commodities businesses has improved considerably in recent weeks. News that China is unwinding Covid-19 restrictions means investors are cautiously optimistic over metals and energy demand next year.
Of course, a fresh explosion in coronavirus cases could see lawmakers put the barriers back up. Weak economic conditions outside China might also harm raw materials consumption in 2023. But at current prices of £58.40 per share, I still believe Rio Tinto (LSE:RIO) shares are highly attractive.
The FTSE 100 miner trades on a forward P/E ratio of 10.9 times. It also packs a juicy 6.2% dividend yield for 2023.
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In fact, I’ve actually bought Rio Tinto shares for my own portfolio. As a long-term investor, I’m excited by the possibility of commodities demand exploding over the next couple of decades.
Soaring adoption of green technologies and increasing urbanisation in emerging markets are just two trends tipped to supercharge demand for a wide range of metals.
Forecasts from consultancy Acumen suggest that copper off-take, for example, will rise at a compound annual growth rate (CAGR) of 4.9% through to the end of the decade.
Rio Tinto produces copper alongside lithium, aluminium and iron ore. These materials will all be in high demand as electric vehicle (EV) manufacturing, renewable energy production and infrastructure spending all take off.
