2 FTSE 100 dividend shares I’ll avoid like the plague in 2025

It’s time for me to get off the fence and make up my mind about two dividend shares that I’ve been watching all this year.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Bronze bull and bear figurines

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When it comes to dividend shares, I’ve been in two minds about British American Tobacco (LSE: BATS) and its forecast 8% dividend yield for some time.

Governments in some developed countries are ramping up their efforts to wean people off tobacco. And a tobacco company can’t hope to do well from that.

But, I’m not convinced tobacco will meet its end anytime soon. Developing countries and their billions of people are surely the customer base for the next few decades. And where development leads to increasing wealth, the demand for premium brands should do well.

Should you invest £1,000 in Gsk right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Gsk made the list?

See the 6 stocks

New markets

And then we have new categories of products. At the halfway point this year, British American saw adjusted total revenue down 3.7%, but with new categories revenue up 3.1%.

The new stuff only accounted for 13% of revenue. But I could see a prospect of new tobacco products taking up the whole market from traditional cigarettes eventually.

Created with Highcharts 11.4.3British American Tobacco P.l.c. PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Dividend prospects

On the dividend front, the company said it remains “committed to our progressive dividend based upon 65% of long-term sustainable earnings“. And it also told us it expects “to generate c.£40 billion of free cash flow before dividends over the next five years“.

All this sounds good, right? So why won’t I buy? I’ve decided I need to stop prevaricating and impose a new hard-and-fast rule for the new year and beyond.

Whenever I see the possible demise of an industry on the horizon, even if I think it could have decades left in it, it’s bargepole time.

Still not buying

I’m shunning my next stock, Vodafone (LSE: VOD), for a different reason. It’s another I’ve been undecided about for a while. And this time the company’s done exactly what I’d been thinking it should.

The board decided to slash the 2025 dividend in half. Vodafone had been paying dividends not covered by earnings for years, while building huge debt. The dividend yield had been up in silly money at over 10%.

Shake-up

New-ish CEO Margherita Della Valle’s trying to shake things up at the slumbering giant. Back in May 2023, she famously said:

We will simplify our organisation, cutting out complexity to regain our competitiveness. We will reallocate resources to deliver the quality service our customers expect and drive further growth from the unique position of Vodafone Business.

Created with Highcharts 11.4.3Vodafone Group Public PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Where’s the beef?

But a year and a half on, the market’s still not convinced. Further share price weakness has pushed the forecast dividend yield up as high as 8% again.

And with all the talk of cutting costs and improving efficiency, the board still found the cash for a €500m share buyback. Messages don’t come much more mixed than that.

Big picture

I’m still seeing a collection of worldwide mobile phone operators here, rather than a joined-up and forward-looking technology pioneer.

I do see a fair chance that Vodafone could prove me wrong and become one of the FTSE 100‘s most dependable dividend payers. But I’m sticking to another of my bargepole rules: don’t buy into a turnaround until I see the turning.

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco P.l.c. and Vodafone Group Public. 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.

Pound coins for sale — 51 pence?

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

More on Investing Articles

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Around a 1-year high, is there enough value left in Next’s share price to make it worth me buying?

Next’s share price has risen a lot in eight months, but there could still be a lot of value left…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

OMG DYOR but IMO this ‘cool’ FTSE 100 stock offers bangin’ VFM!

Despite being one of the least trendy 50-somethings around, our writer considers how Gen Z could help push this FTSE…

Read more »

Investing Articles

2 cheap FTSE 100 and FTSE 250 growth stocks to consider as stock markets sink

I think these Footsie and FTSE 250 growth shares could be very shrewd buys to consider in the current climate.…

Read more »

Investing Articles

3 shares I’ve bought in the 2025 stock market sell-off

The stock market has experienced a lot of turbulence in recent weeks. Edward Sheldon has been taking advantage and buying…

Read more »

Investing Articles

Investors considering HSBC shares could aim for £8,453 a year in passive income from just £5 a day!

A relatively small daily investment in HSBC shares over several years can produce an extraordinary level of annual passive income…

Read more »

Investing Articles

The Rolls-Royce share price has fallen! Is this the moment investors have been waiting for?

Even the Rolls-Royce share price can't escape current stock market volatility, falling slightly over the last week. Should investors consider…

Read more »

Modern suburban family houses with car on driveway
Investing Articles

Down 59% from its 12-month highs, is this FTSE 250 stock too cheap to ignore?

Shares in FTSE 250 housebuilder Vistry are almost certainly too cheap to ignore. But are they discounted enough to offset…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

As the S&P 500 struggles to recover, here’s what Warren Buffett’s doing

The S&P 500 is fighting to regain its February highs amid ongoing trade tariff uncertainty. Our writer looks to the…

Read more »