I think buying these FTSE 100 dividend stocks could be a great way to make a long-term second income. Here’s why I’d buy them for my portfolio today.
BAE Systems
Investors have been piling back into BAE Systems (LSE:BA.) shares of late. The defence giant was the 12th most bought share in the past seven days among Hargreaves Lansdown customers.
This pick up in buying appetite is no surprise to me. A steady fall in BAE Systems shares since late April provides an attractive dip buying opportunity. In addition, the defensive nature of its operations has made the company more appealing as concerns over the UK economy have grown.
Profits at weapons builders like this remain broadly stable even during downturns. This reflects how essential their products are in keeping countries’ armed forces in good fighting condition. In fact the outlook for arms spending is the strongest it has been for decades as relations become chillier between the West and governments in Russia and China.
The UK government, for instance, pledged to spend another £5bn on defence spending over the next two years during the spring. It also promised an extra £2bn each year in subsequent years up to 2027/28.
BAE Systems enjoyed record order intake north of £37bn in 2023, making it the best year on record. Supply chain problems and inflationary pressures could persist that dent earnings. But I still expect earnings here to grow strongly in the next few years at least.
The FTSE 100 firm has a great track record of raising dividends. And expectations of further payout growth in 2023 leave the company with a healthy 3.1% dividend yield.
Legal & General Group
Financial services businesses like Legal & General Group (LSE:LGEN) are more sensitive to the tough economic environment. When people have less money to spend, demand for life insurance, along with retirement and investment products, tends to fall.
Yet the exceptional value that this particular FTSE share offers still makes it a top buy in my opinion. In fact, I recently bought shares in it for my own Stocks and Shares ISA.
Today, Legal and General’s shares trade on a forward price-to-earnings (P/E) ratio of 6.8 times. Meanwhile its dividend yield for this year stands at 9%.
Okay, the business may struggle to increase revenues in the near term. But I fully expect it to grow rapidly over a longer time horizon. A rapidly ageing global population means that demand for pensions, protection, and other financial products should soar from current levels.
Legal and General has terrific brand strength to help it make the most of this opportunity. Its exceptional cash generation also gives it enormous financial firepower to invest for growth (as well as to pay big dividends to its investors!).
The company was the 19th most popular buy with Hargreaves Lansdown clients last week. I plan to hold it in my own portfolio for years to come.
