The Motley Fool

To hell with these FTSE 100 dividend stocks and their 7%+ yields! I’d avoid them at all costs

Stock investors have been piling back into SSE (LSE: SSE) with some gusto in recent weeks, its share price having gained 7% in the past fortnight.

Quite an inexplicable little surge, in my opinion. As I noted in a recent piece about National Grid, investing in utilities at tense times like this can be a good idea. But I wouldn’t stretch this line of argument to cover SSE or its FTSE 100 peer Centrica (LSE: CNA), though, as the exodus of customers from their retail operations remains a major problem.

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...

To underline this, data released this week from trade association Energy UK showed that 2018 was a record year for energy switchers, some 5.8m power customers — or to put that into context, one in five households — changing supplier during the year.

This was up 6% from 2017’s then-record 5.5m switches. What’s more, the data showed that the level of switching activity picked up as last year progressed, with 464,378 users changing provider in December, up 10% year-on-year.

Particularly worryingly for the so-called Big Six suppliers was that more than a fifth of all switches last month involved moving to a small- or medium-sized energy provider, illustrating the pull that those cheaper independent suppliers are having in hard times for British household budgets.

Under pressure

Things look set to remain difficult for some time yet, then. The increasingly-hostile chatter from consumer groups, regulators and politicians alike suggests that the price caps introduced in late 2018 may not be the end of the matter and that things could get much, much worse for the major suppliers’ future levels of profitability.

I’m not actually concerned by their relatively low valuations, Centrica carrying a forward P/E ratio of 11 times and SSE sporting a corresponding multiple of 14.9 times, nor am I interested in their prospective dividend yields of 9% and 7% respectively. The fact is, I wouldn’t touch either with a bargepole right now.

A better income stock?

Could Landsec (LSE: LAND) be a better bet for value and dividend investors?

In the current fiscal year, the commercial real estate investment trust is expected to record an 8% earnings rise, and this leaves it dealing on a cheap forward P/E ratio of 14.3 times. It also means that City analysts are forecasting another chunky increase in the annual dividend, leaving Landsec with a giant 5.6% dividend yield for the year.

But like Centrica and SSE, I’d be tempted to stay away from the Footsie firm today. The decelerating UK economy threatens to hammer demand for the company’s commercial property in the near-term, and possibly for much much longer if Brexit goes off with a destructive bang.

As JP Morgan commented this week when it downgraded Hammerson, rental growth is expected to deteriorate for European retail property owners in 2019. And in my opinion, the likes of Landsec should be braced for difficulties here, and for other critical parts of the domestic economy, this year and thereafter.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Landsec. 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.