Which of these FTSE 100 dividend shares should I buy for passive income in 2024?

Energy producers are classic ‘go-to’ stocks for investors seeking a second income. But which of these FTSE 100 stocks is the better buy today?

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These FTSE 100 income stocks are popular with many investors who are seeking a market-beating passive income. But which one do I think is the better buy for me?

BP

Oil giant BP’s (LSE:BP) share price has crumbled in recent weeks as concerns over crude demand have grown and Brent prices have plummeted. It’s a decline that, on paper at least, makes the company look too cheap for me to miss.

For 2024 the commodities play trades on a forward price-to-earnings (P/E) ratio of 6 times. This is well below the FTSE 100 average of 12 times.

And as for dividends, the yield on BP shares sits at 5.1%, a full percentage point above the Footsie average.

Some would argue that BP’s share price slip provides an excellent dip buying opportunity. The International Energy Agency (IEA) has just revised up its demand growth forecasts for next year, in fact, to 930,000 barrels per day from 880,000 previously.

Meanwhile, supply strains look set to persist as OPEC+ nations keep production curbs in place. This all suggests that fears over soaring stocks of unwanted oil might be overdone.

However, I’m not tempted to buy BP shares for my own portfolio. This isn’t primarily because the outlook for the global economy (and thus oil demand) next year remains extremely murky.

As well as the possibility of a sharp oil price fall in 2024, I’m steering clear of the oil major because its long-term future remains highly uncertain as the world switches to cleaner energy sources.  

My appetite for fossil fuel producers has declined further in fact as industry experts have changed their ‘peak oil’ predictions. In recent weeks the IEA, for instance, has said it now expects oil, gas and coal to peak before 2030.

Worryingly, BP has reduced its oil and gas output reduction plans for the rest of the decade. It also continues to prioritise investment in fossil fuel projects. Consequently, the firm exposes long-term investors to big risks.

SSE

So I’m happy to leave BP shares on the shelf right now. I’d rather invest in SSE (LSE:SSE), a FTSE firm which could deliver huge returns from the green energy revolution.

That’s not to say that operators of wind farms are slam-dunk buys. Earnings can take a big whack when unfavourable weather conditions damage power generation.

Yet on balance I believe the benefits of owning the share could outweigh the risks. In fact, my optimism has improved following the company’s announcement on Wednesday to upgrade its investment programme for the five years to 2026/27.

SSE now intends to spend an extra £2.5bn than it previously outlined, to £20.5bn. Increased spending on renewable energy and to upgrade the country’s power grid will put it in a stronger position to capitalise on the UK’s net zero drive.

As for the company’s near-term dividend prospects, yields for the financial years to March 2024 and 2025 sit at 3.4% and 3.7% respectively. These aren’t the biggest dividend yields out there. But I still think the energy generator is an attractive income stock for me to buy.

Its defensive operations mean its dividend forecasts look stronger than those of many other FTSE 100 shares. And I expect shareholder payouts to grow rapidly as demand for clean energy rises.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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