I reckon the market sell-off has created some cheap buying opportunities in the FTSE 100. Here are three dividend shares I think are top buys today.
This 9% yield looks safe to me
HSBC Holdings (LSE: HSBA) made headlines in the financial press last week when it took over the UK operations of failed US bank SVB Financial (Silicon Valley Bank).
HSBC’s own share price has fallen sharply too as market worries have mounted. However, I think the risk of this £110bn giant suffering any serious problems is minimal.
Indeed, I was reassured by the group’s recent 2022 results. These showed a stable performance and a strong balance sheet. The outlook statement from CEO Noel Quinn also seemed more confident to me than previously.
HSBC’s dependence on China remains a risk, in my view, due to the political situation. But I think the group’s exposure to Asia also provides growth opportunities that aren’t available to UK-only banks.
In particular, I expect HSBC to be a big winner from the reopening of the China this year.
Broker forecasts suggest a dividend of $0.60 per share this year, giving a yield of nearly 9%. That looks safe enough to me. If I didn’t already own enough bank shares, I’d probably buy be buying.
A bargain sin stock
After a strong rally last year, shares in British American Tobacco (LSE: BATS) have reversed sharply. The tobacco group’s share price has fallen by nearly 20% since the end of June last year.
The risks of investing in this business are obvious enough. British American still makes all of its profits from tobacco, as its reduced-harm products are not yet profitable. A long-term decline is a risk, especially in the group’s core US market.
However, sales of vapes and other products are rising fast and are expected to become profitable next year. It’s also worth remembering that the tobacco business has remained bigger and more successful than investors expected 10-20 years ago. I suspect this will continue to be true.
As I write, BATS shares are trading under £30. That prices them on just seven times forecast earnings. With a well-supported dividend yield of 8%, I think this stock looks cheap right now.
A FTSE 100 hydrogen play?
My final choice is industrial group Johnson Matthey (LSE: JMAT). This business is one of the main producers of catalytic converters.
Demand for these expensive exhaust devices might fall as electric vehicle use grows. But Johnson Matthey has been in business for over 200 years and has evolved successfully before.
The company is now using its existing technical expertise to expand into the hydrogen market — a sector where it’s already active.
A failed move into battery manufacturing has left the business with something to prove. Other growth projects could fail too.
However, I think most of this risk is already priced into the stock. Internal combustion engines won’t disappear anytime soon — especially in heavy vehicles such as trucks and buses, where the firm has a big market share.
Johnson Matthey shares currently trade on 10 times forecast earnings, with a 3.9% dividend yield. That looks like good value to me for a long-term investment.
