The Motley Fool

Here are two of my top FTSE 100 dividend stock picks for 2019

As we begin 2019, investing certainly feels very different than it did 12 months ago. This time last year, global equity markets were rising and investor confidence was high. Yet today, economic uncertainty is elevated, markets are falling, and investor confidence is fragile. The FTSE 100 is down again this morning.

However, for long-term investors, I think current market conditions could be an opportunity. Many stocks are trading at lower valuations than they were 12 months ago, and dividend yields are higher. That’s a positive for those with long-term investment horizons. With that in mind, here’s a look at two of my top FTSE 100 dividend picks for 2019.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Unilever

Right now, investors are faced with a considerable level of economic uncertainty. From trade wars and Brexit, to talk of a possible recession, there are a number of reasons why investors are on edge.

Given this uncertainty, I think it’s a good idea to own a number of reliable ‘defensive’ stocks in an investment portfolio, and the first name that comes to mind when I think defensive is Unilever (LSE: ULVR). You see, Unilever owns an incredible portfolio of food and drink, homecare and personal care brands such as PG Tips, Domestos, and Dove, and no matter what’s happening with the global economy, demand for its products tends to remain relatively robust, which is a big plus from a dividend-investing perspective.

For the 2019 financial year, analysts expect Unilever to pay a dividend of €1.64 per share which, at the current share price, equates to a yield of around 3.6%. That’s not the highest yield in the FTSE 100, sure, but the company does have a great track record of increasing its dividend at a rate above inflation all through the economic cycle. And dividend growth looks set to continue in the near term.

Unilever shares are currently trading on a forward P/E ratio of 18.4, which may seem expensive from a traditional valuation viewpoint. However, when you consider the stock’s ‘quality’ attributes, the valuation is fair, in my view.

DS Smith

My next pick, DS Smith (LSE: SMDS), is more of a value pick. The company is a leading international packaging specialist that focuses on providing customer-specific packaging solutions. Operating in 37 countries worldwide, it counts the likes of Amazon, Tesco, and Ikea among its clients.

While there’s a little bit of uncertainty surrounding the short-term growth prospects of FTSE 100 packaging stocks, I believe the long-term growth story for DS Smith remains compelling, as packaging firms look set to benefit from the increase in popularity of online shopping. Indeed, according to a research report from ResearchandMarkets, the global paper packaging market is likely to grow at a compound annual growth rate of 4.2% up to 2023, which is a healthy level of growth. Half-year results from the company, released in early December, certainly looked robust with profit before tax rising 28%.

For the year ending 30 April, analysts expect DS Smith to pay a dividend of 15.9p per share which, at the current share price, translates to a yield of 5.4%. That payout looks sustainable in the near term, as earnings are anticipated to come in at 36.7p per share, giving a dividend coverage ratio of a healthy 2.3. With the shares trading on a P/E of just 8 after a significant selloff last quarter, I think this dividend stock offers considerable value right now.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Edward Sheldon owns shares in Unilever and Ds Smith. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended DS Smith. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.