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Two FTSE 100 dividend stocks I’d buy and hold forever

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Diageo (LSE: DGE) is one of those rare stocks I reckon investors can buy in the knowledge that they can grab and stash away for donkeys’ years without having to worry about it.

You see, labels like Johnnie Walker whisky, Guinness stout and Smirnoff vodka are well loved by drinkers the world over, and they remain in high demand even during periods when consumers’ spending power is hampered by broader economic troubles.

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Diageo may be forced to pay a king’s ransom in marketing expenditure for its brands to retain their lustre with shoppers. Indeed, the FTSE 100 company saw spending on advertising and suchlike jump 7% during July-December to £968m. But the terrific sales performance this programme is delivering across all its major regions clearly justifies this increased spend.

Sales in its core North American marketplace (responsible for 33% of net sales) may have disappointed in the six months but these still rose 2% in the six months to £2.1bn, a result that helped push group net sales 4% higher to £6.5bn.

And there was plenty to celebrate in some of Diageo’s other exciting markets. In Europe, and Turkey net sales rose 4% as demand took off across all categories. Meanwhile in the exciting growth markets of Asia, sales rose 7%, underpinned by soaring demand in the regional powerhouse. Net sales here jumped 32% between July and December.

Dividends marching on

The combination of brilliant brand power and a broad geographic base means that Diageo boasts the kind of earnings visibility that most companies can only dream of. And this, combined with its eye-popping cash flows, means that the drinks giant is a splendid pick for those seeking robust dividend growth year after year, in my opinion.

Indeed, in the year ending June 2018, the Footsie favourite is predicted to record a 6% year-on-year earnings improvement. Consequently City analysts are also expecting it to hike total dividends to 65.5p per share from 62.2p last year, resulting in a chunky 2.7% yield.

Diageo may carry an elevated forward P/E ratio of 20.8 times. But in my opinion its exceptional defensive qualities makes it worth every penny.

Another FTSE 100 income star

The Berkeley Group (LSE: BKG) is another big-cap dividend beauty I think investors can buy in the knowledge that it should deliver knockout returns in the years ahead.

Conditions for UK housebuilders are the most difficult they have been for many, many years thanks to the tense political and economic backcloth. Despite this, the likes of Berkeley continue to report favourable performances and earlier this month it said that it expects to record forward sales of £2bn as of the end of April.

It added that “the fundamentals of the market in London and the South East remain compelling” and this is no great surprise given the supply and demand imbalance in the domestic housing market, a situation that looks set to continue long into the future.

City brokers agree, and they anticipate growth of 10% in the 12 months to April, resulting in a forward P/E ratio of just 7.4 times. And this also leads to  predictions of a vast 177.5p per share dividend, meaning investors can enjoy a market-bashing 4.7% yield.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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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