While the market sell-off over the last week has been frustrating, it’s also created a lot of opportunities for dividend investors. Many FTSE 100 dividend stocks have been indiscriminately dumped, and as a result, there are some interesting dividend yields appearing.
Today, I’m looking at three that I don’t yet own, but I am considering buying after the recent stock market rout.
Hargreaves Lansdown (LSE: HL) is generally considered more of a growth stock than a dividend one as it trades on a high valuation. Yet after the recent market sell-off, the prospective yields for this financial year and next are now 2.5% and 2.9% respectively, which look attractive when you consider that the group has lifted its payout by over 500% in the last decade.
I’m a huge fan of Hargreaves’ investment platform, simply because it’s so easy to use. Whether you want to buy a stock or a fund, Hargreaves makes the process very straightforward. It’s no surprise the company has such a high market share. I also like the long-term story – Britons desperately need to save more for retirement, and as a market leader in the investing space, HL looks well placed to capitalise.
While the stock has fallen from £22.60 to £18 in the last two weeks, it’s still a little too expensive for my liking, as the forward P/E is 31.3. I’m watching this one with interest – if it falls a little further, I may just pull the trigger and buy it.
Next, I’m also monitoring consumer goods champion Reckitt Benckiser (LSE: RB), which owns a large portfolio of well-known health and hygiene brands that consumers buy in good times and in recessions. Its shares have lost 10% since early October.
I view Reckitt as a high-quality company that has a compelling long-term growth story in the form of emerging markets exposure. I believe it looks well placed to benefit from rising consumer spending and population growth across those emerging markets, particularly after the recent acquisition of baby-milk specialist Mead Johnson.
Reckitt currently trades on a forward P/E of 19.5 and offers prospective yields of 2.6% and 2.8% for this year and next. Ideally, I’d like to be picking up a little more value here as growth is a bit slower, so I’m going to hold off on buying for now. However, if the stock keeps falling, my interest will definitely increase.
Lastly, £6bn market cap Johnson Matthey (LSE: JM) has also attracted my interest after the recent market volatility. Very much an under-the-radar stock, it researches, develops and delivers technologies to help build a cleaner, healthier world and so should be well placed to benefit as society becomes more focused on environmental protection and sustainability.
With a prospective yield of 2.8%, JM is certainly not the highest-yielding stock in the FTSE 100. That said, there’s a lot to like about the company from a dividend investing perspective as it has an outstanding dividend growth track record and also has very strong dividend coverage. Indeed, the company has now notched up 20 consecutive annual dividend increases, and with forecast earnings and dividends this year of 227p per share and 85.9p per share respectively, dividend coverage looks very robust at 2.6 times.
Trading on a forward P/E of 13.6, the investment case here is beginning to look interesting.
Do you want to retire early and give up the rat race to enjoy the rest of your life? Of course you do, and to help you accomplish this goal, the Motley Fool has put together this free report titled "The Foolish Guide To Financial Independence", which is packed full of wealth-creating tips as well as ideas for your money.
The report is entirely free and available for download today, so if you're interested in exiting the rat race and achieving financial independence, click here to download the report. What have you got to lose?
Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.