The Motley Fool

I’d forget about buy-to-let and buy these FTSE 100 dividend growth stocks instead

Regular readers will know that we at The Motley Fool believe that buy-to-let is not the Holy Grail that many investors believe it to be. Heck, recent polling shows that the UK’s army of landlords are more pessimistic about the sector than they have been for a very, very long time.

My colleague Harvey Jones took some time at the weekend to explain why splashing the cash on the FTSE 100 rather than directly investing in property is a better choice for those hoping to generate spectacular returns in the coming years.

I couldn’t agree more. There’s a galaxy of opportunity for stock investors to get rich right now, whether through buying into a tracker fund or snapping up shares in individual companies. Here I am looking at two great blue-chips that are particularly attractive for dividend chasers, London Stock Exchange Group (LSE: LSE) and St James’s Place (LSE: STJ).

Dividend growers

There are plenty of stocks on the Footsie with larger yields than those from London Stock Exchange, its figures sitting at 1.4% and 1.6% for 2018 and 2019 respectively.

But the rate at which it has lifted dividends in recent years (up 90% in the past five fiscal periods) and predicted to continue doing so makes it a hot income share to buy today. Last year’s 51.6p per share payment is anticipated to shoot to 59.3p per share in 2018, and to rise again next year to 69p.

These forecasts are propped up by expectations that earnings will boom 15% this year and a further 17% in 2019. Latest trading details from London Stock Exchange make these projections appear more than feasible too, the business reporting last week that strength across all of its divisions pushed total income 8% higher between July and September to £522m.

And I am tipping revenues to continue booming, thanks to the inevitable growth in trading activity across the world’s share markets. A forward P/E ratio of 25.1 times may be expensive on paper, but I reckon London Stock Exchange is worth it.  

Show-stopping yields

I’d also happily buy St James’s Place (LSE: STJ), despite its similarly-elevated earnings multiple, in this case a prospective P/E ratio of 22.3 times.

The wealth manager is predicted to endure some earnings turbulence in the near term, an 18% profits dip predicted for 2018. But it’s anticipated to come roaring back with a 19% bottom-line jump next year. This projected revival comes as no surprise as net inflows continue to surge, St James’s Place reporting last week that record assets under administration reached £100.6m in September, a fresh all-time high.

Thus the Footsie firm is expected to have the confidence to keep raising dividends at a rate of knots, and rewards of 49.5p and 57.8p per share are estimated for 2018 and 2019 respectively by City boffins. As a consequence, yields stand at a stunning 5.5% and 5.8% for these years, figures which make it one of the hottest big cap dividend shares out there right now.

Want To Boost Your Savings?

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?

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.