5%+ yield! 2 FTSE 100 dividend stocks I’m considering buying this March

These delicious FTSE 100 income stocks are on sale right now! Here’s why our writer Royston Wild is considering adding them to his portfolio.

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I think now’s a great time to go shopping for FTSE 100 dividend stocks.

UK blue-chip shares tend to have one or several special qualities that make them ideal for dividends. Market-leading positions, strong balance sheets, and diversified operations often lay the path to large dividends that can grow over time.

And right now, shares on Britain’s leading stock index look mightily undervalued. FTSE 100 companies now trade on an average forward price-to-earnings (P/E) ratio of 10.5 times. That’s some way below the historical average of approximately 16 times.

Here are two cheap passive income stocks I’m thinking about buying in March. Each carries a dividend yield far above the 3.8% Footsie forward average.

United Utilities

Water companies like United Utilities (LSE:UU.) are dependable dividend payers thanks to their ultra-defensive operations.

Our demand for water remains unchanged regardless of what economic, political, or social crises may occur. This gives them the profits, cash flows, and confidence to pay market-beating dividends year after year.

And while its operations are highly regulated, rules that permit inflation-linked price increases help it to offset the impact of higher costs on its profits.

Investing in water companies is more risky than usual today as politicians and regulators take aim. Controversies over the sector’s environmental performance and record of investment in particular could have large consequences for the FTSE firm and its peers.

But I think buying United Utilities could still be a good idea given the cheapness of its shares. For the upcoming financial year (to March 2025), the company trades on a forward price-to-earnings growth (PEG) ratio of 0.2. Any reading below one suggests that a stock is undervalued.

With a 5% dividend yield, too, I think it’s an attractive value stock right now.

DS Smith

Boxmaker DS Smith (LSE:SMDS) is another cut-price star on my watchlist this month. I already own it in in my Stocks and Shares ISA, and its enduring all-round value is making me consider adding more to my holdings.

Today it trades on a forward price-to-earnings (P/E) ratio of 9.8 times. It also carries a whopping 5.6% dividend yield.

DS Smith has attracted the attention of a major rival recently as takeover fever in London has heated up. Last month it announced Mondi (also of the FTSE 100) was “considering a possible offer“, though no further news has been forthcoming.

Rumours that it could become a target have been circulating for years. The packaging sector is highly fragmented. And DS Smith — with its wide geographic footprint across North America and Europe, along with its focus on sustainability — has considerable long-term potential.

I bought the company for my ISA as a way to capitalise on the growing e-commerce and food retail segments. Its boxes and packaging solutions are essential for both sectors. What’s more, its excellent track record of innovation makes it a favoured provider of industry giants like Amazon.

Near-term pressure on consumer spending may hamper earnings growth. But on balance I think it’s a brilliant bargain at current prices.

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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has positions in DS Smith. The Motley Fool UK has recommended Amazon and 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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