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Have £1k to invest? easyJet is a FTSE 100 dividend stock I’d buy today

While the FTSE 100’s dividend yield of 4.4% is relatively high, it’s possible to generate an even greater income return at present. One stock which offers a higher yield is easyJet (LSE: EZJ). The company’s share price fall of 23% over the last year means it now has a dividend yield of 5.4%.

Of course, the prospects for the airline industry remain uncertain. However, easyJet appears to offer strong growth at a reasonable price. Therefore, it could be worth buying alongside another income share which reported encouraging progress on Thursday.

Improving performance

The company in question is integrated public transport specialist Go-Ahead (LSE: GOG). Its results for the first half of the year showed it’s making good progress in winning new bus and rail contracts, as well as growing its core business. Operating profit for the period was ahead of expectations, with guidance for the full year increased as a result of strong performance from its rail segment.

The company has continued to gain momentum in its international expansion. It’s also investing in innovative projects in order to keep up with changing customer tastes. For example, demand for its responsive transport operation in Oxford, PickMeUp, has grown to 20,000 registered users and is becoming increasingly popular.

With Go-Ahead having a dividend yield of 5.2%, it could offer income investing potential. Dividends are covered 1.6 times by profit, which suggests there’s a healthy level of headroom. And with the company’s shares trading on a price-to-earnings (P/E) ratio of around 12, there could also be a value investing opportunity on offer.

Resilient performance

As mentioned, the easyJet share price has experienced a challenging year. Fears surrounding the wider airline industry have caused investors to become increasingly risk averse. Given the number of companies operating in the sector that have experienced financial challenges in recent months, those fears aren’t unfounded. Indeed, declining consumer confidence and greater competition have caused fares to come under pressure, which has squeezed profitability for a number of industry operators.

easyJet, though, could benefit from such a scenario in the long run. Its strong position in both a competitive and financial sense could mean it’s able to increase market share as smaller, less profitable rivals ultimately fail. While it may mean reduced profitability for the business in the near term, it could help to propel its dividend higher in the coming years.

With the airline’s dividend currently being covered twice by net profit, it seems to be affordable even during a challenging period for the industry. Since the stock has a price-to-earnings growth (PEG) ratio of just 0.6, it could also deliver impressive capital growth alongside its high income return. As such, now could be a good time to buy in for income and value investors alike.

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Peter Stephens owns shares of easyJet. 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.