I’m shopping in the FTSE 100 for world-class dividends!

This Fool’s looking for quality income shares and he reckons the FTSE 100’s the place to find them. Here are two he’s fond of.

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I love the FTSE 100 for a couple of reasons. Firstly, its jam-packed with top-notch businesses. But, and more importantly, it’s home to some of the best quality dividend-paying companies out there. I’m going shopping for world-class dividends.

I’m not necessarily on the hunt for the largest dividend yields possible. Instead, I’m looking for stable yields that I see rising in the years to come. That’s important given that dividends are never guaranteed. I reckon these two shares fit that bill perfectly.

Diageo

Pick number one is Diageo (LSE: DGE). While the Footsie has soared this year, the alcohol beverage giant hasn’t. It’s down 9.1% year to date. That brings its total loss for the last 12 months up to 25.3%.

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Created with Highcharts 11.4.3Diageo Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

However, there’s one positive to its share price taking a hit. It means a higher yield. At the time of writing, it sits at 3.2%. With the FTSE 100 average being 3.6%, that may not seem all too appealing. But, in my opinion, Diageo’s dividend’s one of the best on the index.

That’s because the business has a monumental track record of rewarding shareholders. It’s paid a dividend for nearly four decades, making it a Dividend Aristocrat. With its payout covered a healthy two times by earnings, there could be potential for further growth in the coming years.

The stock now also looks like very decent value for money. It trades on 18.1 times earnings. Its historical average is closer to 25. Right now, it’s near a 10-year low.

Weak consumer spending’s been weighing on its share price. A drop in sales in Latin American and Caribbean and the profit warning that followed suit has spooked some investors. This will likely remain a threat in the coming months.

But with premium brands under its umbrella and a strong market position, I expect it to thrive over the long run.

Unilever

Also offering world-class dividends is Unilever (LSE: ULVR). Unlike struggling Diageo, the consumer goods company’s flying. Year to date, its share price is up 23.8%.

Created with Highcharts 11.4.3Unilever PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The stock shot up after its latest results were released on 25 July. Revenues were up 2.2% and net profit rose 3.5% during the second quarter. However, what excited investors most was the positive strides the firm’s taken as it continues with its streamlining operation.

Unilever sports a 3.1% yield. Again, while on paper that may not jump out as world-class, it also has an impressive record of rewarding shareholders. Like Diageo, Unilever’s also a Dividend Aristocrat.

Alongside its dividend, Unilever also brings some stability to my portfolio. It’s a defensive stock. It sells essential products. In fact, its products are used by more than 3.4bn people every day in over 190 countries.

That said, the goods it sells are branded. That means they come at a price premium to similar own-brand items. In times like the one we’re experiencing now during the cost-of-living crisis, consumers may switch to cheaper alternatives.

However, Unilever’s proved its resilience over the past couple of years. Sales have continued to grow despite ongoing economic uncertainty. That’s why I back the stock to continue performing in the years ahead.

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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.

Charlie Keough has positions in Unilever. The Motley Fool UK has recommended Diageo Plc and Unilever. 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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