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One FTSE 100 dividend stock and one growth stock I’d buy and hold forever

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Even though the FTSE 100 has made solid gains in recent weeks, it still doesn’t appear to be overvalued. The index has risen by 500 points in the last month and has nearly made up the ground it lost in the correction experienced in the first three months of the year. However, its 4% dividend yield suggests that it could have further upside potential.

With that in mind, here’s a FTSE 100 dividend stock that seems to offer high total return potential. Alongside it is a small-cap growth stock which could also outperform the UK’s main index.

Improving performance

The growth stock in question is manufacturer and distributor of LED lighting products Luceco (LSE: LUCE). It released an impressive set of 2017 results on Monday which showed a rise in revenue of 25.4%. The company was also able to deliver a 19.3% rise in operating profit to £14.2m as the business generated revenue growth across all its product categories.

Luceco has continued to invest in higher margin sales opportunities in the UK. It’s also investing capital in its international sales presence, while an expansion of its product ranges and a pipeline of new product launches could lead to stronger financial performance over the medium term.

With the stock forecast to grow its bottom line by 26% in the current year, followed by further growth of 29% next year, it seems to offer impressive growth potential. Despite this, its shares trade on a price-to-earnings growth (PEG) ratio of just 0.3, which suggests that they may offer a wide margin of safety at the present time. Therefore, with growth and value appeal, the company could be worth buying right now.

Income potential

With that FTSE 100 dividend yield of around 4% at present, it’s possible to generate a significantly higher income return. For example, insurance specialist Admiral (LSE: ADM) has a 6% dividend yield, and could offer investment potential for the long term.

Certainly, the last few years have been an uncertain period for the motor insurance industry. The change in the Ogden discount rate caused investor sentiment to come under a degree of pressure. However, with investor sentiment now more buoyant the industry appears to offer significant upside potential. And while Admiral may have a price-to-earnings (P/E) ratio of around 19, continued dividend growth could lead to improving share price performance.

With the company expected to increase dividends per share by over 13% per annum during the next two years, it could become an even more impressive income share. Although inflation is now falling, uncertainty surrounding Brexit could pick up over the next couple of years. This could make dividend stocks more appealing and lead to rising total returns for their investors.

Capital Gains

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Peter Stephens owns shares of Admiral Group. The Motley Fool UK has no position in any of the shares mentioned. 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.