2 FTSE 100 dividend stocks for beginners

If you don’t know where to start, these dividend stocks can help you build your portfolio from scratch.

| 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.

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.

Constructing a dividend portfolio from scratch can seem like a daunting prospect to begin with, but it doesn’t have to be. There are plenty of high-quality blue-chip dividend stocks out there, which would make great income investments for the investing beginner.

GlaxoSmithKline (LSE: GSK) is just one such example. Glaxo is a boring company. Over the past five years, shares in the group have risen by 8%, so if you’re looking for the next Apple or Amazon, you should look elsewhere. 

However, when it comes to income, Glaxo is an income champion. The business of selling pharmaceutical products is a highly defensive one, and Glaxo’s defensive nature means that the company’s dividend yield is one of the most secure in the FTSE 100. Granted, over the past five years the company has struggled to grow as some key products have come off patent. But during the previous two years, growth has returned.

From a low of 76p in 2015, earnings per share are expected to hit 111p for the year ending 31 December 2017, up 46% in two years. Some of this growth has been a direct result of weak sterling, but the firm has also managed to clock up some organic growth as new products have hit the market and sales of existing products have continued to gain traction.

Well diversified 

The great thing about Glaxo is its product diversification. The company manufactures and sells many different pharmaceutical products, meaning that revenue is diversified and falling sales for one product will not undermine overall group sales. This is why Glaxo’s dividend looks to be one of the safest in the FTSE 100. 

City analysts are expecting the company to pay 80p per share in dividends this year, unchanged for the past three years. The payout is expected to be covered 1.4 times by earnings per share, and if the company hits City growth estimates, there’s a chance the payout could rise to 80.3p next year for a yield of 5.1% at current prices. Shares in Glaxo currently trade at a relatively attractive forward P/E of 14.1.

Highly defensive company 

United Utilities (LSE: UU) is another top dividend play for beginners. Water is the world’s most valuable resource, and as one of the largest water groups in the UK, Untied is unlikely to see a fall in demand for its services anytime soon. 

Unfortunately, United’s highly defensive nature means that investors are willing to pay a premium to get their hands on shares in the company. At the time of writing, the shares trade at a forward P/E of 21.7. Still, despite this relatively high valuation, the shares support an attractive dividend yield of 4%, which is slightly above the FTSE 100 average of 3.7%. Put simply, if you’re looking for a slow and steady, predictable income stream, you can’t go wrong with United.

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.

Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »