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2 of the worst FTSE 100 dividend stocks of 2018 (so far)

2018 has proven to be a tough nut for much of the FTSE 100, including the two dividend shares described below.

But does this represent a sound dip-buying opportunity, or just a trap for gullible share investors?

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Glencore

There has been no shortage of legal and political intrigue at Glencore (LSE: GLEN) in 2018, far too much in fact than can be covered here. These troubles have forced its share price 17% lower in the year to date, and the conveyor belt of bad news shows no signs of slowing.

At the start of July the company was whacked with a US Department of Justice subpoena concerning an investigation into possible money laundering, its dealings in the Democratic Republic of Congo (DRC), Venezuela and Nigeria dating back as far as 2007 coming into the crosshairs of lawmakers.

This followed a Bloomberg report in May that Glencore is facing possible action by the UK Serious Fraud Office over possible bribery in the DRC, and its dealing with the country’s president Joseph Kabila and Israeli businessman Dan Gertler.

These issues could take years to be resolved and thus you should be prepared for much more share price turbulence. But these aren’t the only troubles that threaten to plague Glencore in the near term and beyond, from the challenges created by the DRC’s new mining code and the potential hiccups caused by President Trump’s trade wars, through to the prospect of heaving oversupply in many major commodity markets.

Some would argue that Glencore’s not-inconsiderable risk profile is reflected in its low, low valuation, a forward P/E ratio of 8.7 times. I’m not tempted by this, however, nor the predicted dividends of 15.9p and 17.4p for 2018 and 2019, figures that yield 4.9% and 5.4% respectively.

RBS

I’m not splashing out on Royal Bank of Scotland (LSE: RBS) right now either as I believe the risks here also outweigh the possibility of rich rewards. This is despite the 12% share price decline endured since the turn of January leaving the Footsie firm trading on a forward P/E multiple of just 9.7 times.

The newsflow surrounding RBS has been far from catastrophic so far in 2018, having said that. First-quarter income rose £90m from the corresponding 2017 period while operating costs dropped by £442m, results that helped attributable profit rise to £792m from £259m a year earlier.

These solid numbers weren’t the only cause for celebration either as the $4.9bn settlement signed in May with the Department of Justice related to the sale of mortgage-backed securities a decade ago paves the way for the government to sell its remaining stake in the bank and prompt the resumption of dividend payments.

The City thinks this will begin with a 7.7p per share dividend in 2018, a figure that yields a chunky 3.7%. And the dial moves to 6% as a full year of expected payouts nudges the annual total to 14.8p.

However, investors remain cautious as to whether RBS will be able to meet these estimates. Sure, dividends appear to be closer now than at any point since the financial crisis, but the company’s wafer-thin balance sheet and murky revenues outlook amidst a slowing domestic economy could see these projections fall flat. Because of this I’m more than happy to give the bank a miss today.

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Royston Wild has no position in any of the shares mentioned. 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.

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