Is now the right time to buy these Neil Woodford dividend stocks?

Popular FTSE 100 dividend stocks AstraZeneca (LSE: AZN), Imperial Brands (LSE: IMB) and Provident Financial (LSE: PFG) collectively account for 21% of Neil Woodford’s Equity Income Fund portfolio. This might seem like a buy recommendation, but I think some caution is required.

While I believe all three stocks are attractive long-term holds, I think that valuation changes since the referendum mean that now may not be the best time to put new money into these stocks.

Currency rewind?

AstraZeneca and Imperial Brands both make the majority of their sales overseas. The fall in the value of the pound that followed the referendum meant that these companies’ foreign earnings were worth more when converted to pounds.

Both companies’ UK-listed shares rose strongly as a result: AstraZeneca has climbed 24% since the referendum, while Imperial’s share price is 8% higher.

However, currency factors do tend to even out over the medium term. The pound has been climbing against the US dollar recently, and is now worth $1.32, up from a post-referendum low of $1.27.

If the pound continues to climb, some of the share price gains seen since the referendum may start to unwind. Shares in companies such as Astra and Imperial could fall and become more affordable once more.

Too expensive?

AstraZeneca and Imperial currently trade on about 16 times forecast earnings, with forward dividend yields of about 4.3%. I’m not sure either stock is a bargain.

Although Imperial is expected to report earnings per share growth of 10%-15% in 2016 and 2017, the group’s £13.8bn net debt is a significant burden relative to forecast profits of £2.3bn.

Over at AstraZeneca, management is still struggling with declining profits from medicines that have lost patent protection. Earnings per share are expected to fall slightly in both 2016 and 2017. With the shares trading close to all-time highs, I suspect there will be better buying opportunities over the next six-to-12 months.

What about Provident Financial?

Sub-prime lender and banking provider Provident Financial only operates in the UK and Ireland. The group’s shares fell by 25% in the aftermath of the referendum, but have since regained all of their lost ground.

Provident shares have risen by 189% over the last five years. They’ve been a good buy for Mr Woodford and other long-sighted investors. But growth appears to be slowing and the stock doesn’t look especially cheap to me.

The latest consensus forecasts suggest that Provident’s earnings per share will rise by 9% in 2016 and 7% in 2017. If correct, this will mark the end of a long run of double-digit profit growth. In my view, the stock’s 2016 forecast P/E of 18 is probably high enough, despite a tempting 4.3% forward dividend yield.

On the other hand, I may be wrong. Provident’s recent interim results were very strong. Adjusted earnings per share were 10.7% higher, at 77.9p. The group’s Vanquis Bank business reported a 6.5% rise in customer numbers during the period, with arrears at “record lows”.

I’d be happy to hold shares in all of these companies, but I wouldn’t buy (or sell) any of them today. I think there are better opportunities elsewhere for dividend investors.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.