While inflation may have fallen to 2.4% last month, FTSE 100 dividend shares are likely to remain popular. The index offers a 4% dividend yield at a time when a cash ISA provides a negative real return. As such, shares could deliver a superior income return in the long run, with National Grid (LSE: NG) and its dividend yield of 5.9% especially appealing, due in part to the company’s defensive business model.
Of course, there are other shares that offer even higher dividend yields than the FTSE 100, or even National Grid. Reporting on Wednesday, was one such stock which could be worth a closer look for income investors.
The company in question is residential developer Crest Nicholson (LSE: CRST). It reported a relatively disappointing pre-close trading update which showed operating conditions have been tough. It’s not seen the usual pickup in demand for new homes in London, or at higher price points in the South of England in September or October. As such, it now expects pre-tax profit will be in the range of £170m to £190m for the year to the end of October.
The company intends to focus on shareholder returns by prioritising cashflow and dividends, while also maximising the value in its land and development portfolio. With a dividend yield of 8.9% from a shareholder payout that’s covered twice by profit, the company’s income prospects continue to be relatively strong.
Clearly, Crest Nicholson could experience further challenges in the short run. It seems as though consumers are delaying purchases due to fears surrounding Brexit and the wider UK economy. Given the company’s price-to-earnings (P/E) ratio of around 6, though, it could offer a wide margin of safety at the present time.
Uncertainty is also present in the wider stock market. The IMF’s recent reduction in global growth forecasts has prompted investors to re-evaluate their views on the outlook for share prices. Recent stock price falls could continue in the near term, with a decline in the FTSE 100 below 7,000 points being unsurprising. That’s especially the case since further tariffs could be ahead, should the US and China fail to reach an amicable agreement on future trade.
Given the uncertainty facing world stock markets, National Grid could become an increasingly popular stock. Its track record suggests that it may be unable to deliver high earnings growth, but could be a resilient and robust stock over the medium term. Investors may flock to less risky assets, of which the electricity and natural gas delivery company could be a prime target.
As mentioned, National Grid has a near-6% dividend yield at the moment. Dividend growth of just under 3% per annum is expected over the next two years. As such, it could prove to be a sound income investment, as well as a strong performer should the FTSE 100 experience continued volatility.
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Peter Stephens owns shares of Crest Nicholson and National Grid. 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.