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2 FTSE 100 dividend stocks offering strong value right now

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The FTSE 100 has enjoyed an excellent run since late March and is only a whisker off its all-time high, set in May.

Yet that doesn’t mean there isn’t value to be found. Not all stocks have risen in line with the index, as a large proportion of the footsie’s recent gains have been driven by the strength of oil prices and the gains of Royal Dutch Shell and BP.

Today, I’m looking at two FTSE 100 dividend stocks that I believe offer strong value right now. Both are way off their highs, and as a result, offer big dividend yields at present.

British American Tobacco

British American Tobacco (LSE: BATS) shares have performed poorly in 2018, falling over 20% for several reasons.

First, after the acquisition of Reynolds American last year, BATS now has significantly more debt on its balance sheet. Total long-term debt on its books has surged from £16.5bn at the end of 2016, to £44bn at the end of 2017, adding risk to the investment case.

Second, it seems that many investors are not convinced that next generation vaping products can replace the profits provided by traditional cigarettes. Third, some investors, such as Dutch insurer NN Group, are selling out of the sector entirely, because of the health, social and environmental costs linked to tobacco.

Add these factors together, and it’s not surprising that the tobacco stock has fallen. But could the decline have provided an opportunity for long-term dividend investors? I think so.

British American Tobacco has an excellent dividend track record, increasing its payout from 66.2p per share a decade ago, to 195.2p per share last year. At today’s share price, last year’s dividend equates to a trailing yield of 5.1% — an attractive proposition in the current low-interest-rate environment. The dividend payout looks safe too, as coverage is expected to be around 1.5 times this year and City analysts expect the payout to be increased both this year and next.

While smoking rates may be declining in developed countries, in many developing countries smoking is still very popular. As a result, I believe the group should be able to keep rewarding shareholders with dividends for many years to come. Trading on a forward P/E of 12.8, the shares offer attractive value, in my opinion.

WPP

Another FTSE 100 dividend stock I believe offers strong value at present is WPP (LSE: WPP).

The global advertising giant has endured a tough year, with conditions in the ad industry remaining challenging and CEO Martin Sorrell stepping down following allegations of personal misconduct. But after a 30% share price fall in the last 12 months, is now the time to take a closer look at the stock?

WPP’s share price decline has pushed the stock’s yield up to a level that is hard to ignore, in my view. Last year, the group paid out 60p per share in dividends, which equates to a trailing yield of 4.8% at the current share price. While revenue and earnings are expected to dip this year, I’d expect the company to maintain its dividend at that level, as it has never cut its payout in the past and dividend coverage was healthy at a ratio of two times last year.

Trading on a forward P/E of just 10.7, I believe WPP shares are worth considering for the dividend right now.

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Edward Sheldon owns shares in WPP and Royal Dutch Shell. 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.