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Create a second income stream with these 2 FTSE 100 dividend growth stocks

IAG (LSE: IAG) was still sinking on Tuesday as the fallout of the recently-announced data breach continued.

The British Airways and Iberia owner was hit by cyber criminals at the start of September and the credit card details, names and addresses of some 380,000 people snatched. Investors are concerned over what financial penalties IAG could face following the latest failure in its online systems, with many commentators suggesting a fine running into the hundreds of millions of pounds.

It’s a concern, naturally, but I would consider the five-month dip in IAG’s share price to be a great buying opportunity. Its increasing exposure to the booming low-cost travel market in particular makes it a terrific selection in the years to come, and in the more immediate term, City analysts are forecasting earnings growth of 9% and 4% in 2018 and 2019 respectively.

It’s also no surprise to see the number crunchers anticipating further dividend growth too. Last year’s payout of 27 euro cents per share is set to rise to 29 cents this year and again to 32 cents in 2019, figures that yield 4.1% and 4.5%.

This recent share price weakness leaves IAG dealing on a forward P/E ratio of 6.2 times. It’s a rating that’s far too cheap in my opinion, particularly given the prospect that booming dividend expansion can continue long into the future.

In recovery mode?

The Sage Group (LSE: SGE)  has experienced some share price pressure in recent times as well, down 28% since the turn of 2018 and currently languishing around levels not seen since the beginning of 2016.

Unlike IAG, though, the accounting software colossus does not carry the same classic value characteristics of its Footsie rival. Its prospective P/E multiple of 16.2 times sits a long way ahead of the widely-considered bargain benchmark of 10 (and under) where IAG resides.

Sage’s multiple still suggests to me that investors are getting plenty of bang for their buck. As has been mentioned before, the impact of successive profit warnings this year, allied with uncertainty over the direction of the firm amid the decision to jettison chief executive Stephen Kelly more recently, has smashed Sage’s appeal as a safe-as-houses stock selection.

There’s no guarantee that the business won’t suffer more trouble should it announce that it had failed to secure the strong Q4 licences it has been tipping when it declares results for the 12 months to September on November 21.

But City brokers are anticipating that Sage will hit its fourth-quarter target, and that it can continue to build on the solid momentum of recent months. This is illustrated by analysts forecasting an 8% profits rise in fiscal 2019, suggesting that Sage can keep its long-running profits growth story intact. And they are predicting that dividends should keep rising as well.

A 16.5p per share dividend is anticipated for the year just passed, up from 15.42p in the previous period, and a rise to 17.8p is predicted for the new period. This yields 3.1%. While rising competition is also causing some concern over profits growth at Sage, I am convinced that the business has all the tools to keep delivering solid profits and dividend expansion in the years ahead.

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