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Two FTSE 100 dividend stocks I’d buy before Christmas

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We’re already into December, with Christmas and the end of 2018 not far off. There’s no denying this year has been an absolute rollercoaster for financial markets. Just last week, I was discussing how the FTSE 100 has been battered from uncertainty over trade wars and Brexit this year. Yet today the index is up around 2% after the US and China have agreed on a trade-war truce.

Could this be the start of a ‘Santa rally’? That’s impossible to know at this stage. Either way, I believe there are some absolute bargains in the FTSE 100 right now. Here’s a look at two FTSE 100 dividend stocks I’d buy before Christmas.

BAE Systems

While that truce may have been called for now, geopolitical uncertainty is unlikely to go away altogether. For this reason, I remain bullish on the long-term outlook for defence – both physical and cyber. I simply don’t think governments can afford to take a light approach to defence in the current environment.

One of my favourite stocks in this sector is £15.7bn market-cap defence specialist BAE Systems (LSE: BA), which is a key player in the air, land and naval defence markets, and also has a growing cybersecurity arm. With operations in 40 countries, its reach is truly global.

BAE Systems shares have fallen sharply in recent months after the group has come under pressure for doing business with Saudi Arabia in the wake of the killing of journalist Jamal Khashoggi in early October. BAE generates around 16% of its annual sales from Saudi Arabia, so it’s understandable that investors are apprehensive about the stock at present. Yet for those with a long-term view, I believe the recent share price fall may have created a fantastic entry point, as I don’t think the Saudi Arabia-related uncertainty will last forever.

Right now, BAE shares can be picked up on a P/E ratio of just 11.4, which is good value, to my mind. Furthermore, a prospective dividend yield of 4.5% is on offer, which adds appeal to the investment case. I see this FTSE 100 dividend stock as one to buy sooner, rather than later.

Prudential

Another dividend stock that I believe offers fantastic value right now is insurer Prudential (LSE: PRU). Its share price is down around 15% year to date, and I think now could be the perfect time to pick up the shares.

The main reason I like Prudential is that the company has significant exposure to fast-growing Asian markets. Wealth across Asia is likely to rise rapidly over the next few decades, and that means there should be robust demand for Prudential’s financial solutions. Just recently, the group advised that in the last four years, its Asia business has more than doubled new business profit. CEO Mike Wells also said looking ahead, the profitable growth prospects of the Asia business remain “substantial.”

City analysts expect Prudential to generate earnings per share of 151.1p this year and pay out a dividend of 50.4p per share. At the current share price, those estimates equate to a forward P/E of 10.6 and a prospective dividend yield of 3.1%. That’s ‘buy’ territory, in my view.

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Edward Sheldon owns shares in BAE Systems and Prudential. The Motley Fool UK has recommended Prudential. 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.