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Are these hated FTSE 100 dividend stocks glorious dip-buys or just investor traps?

The recovery in market sentiment that’s driven the FTSE 100 higher since the start of the year ran out for Wood Group (LSE: WG) almost as quickly as it began.

The engineer’s share price is down 34% in less than five months and it’s looking possible it will keep extending this poor run. The tough market conditions it’s facing were illustrated in December with news that, while recent positive trading momentum had continued and it expected to report “good” organic growth in 2018, conditions were more uncertain for the current period.

Sure, the outlook for its industrial end markets remain “generally favourable.” But given that Wood Group generates the lion’s share of its profits from the oil and gas sector this isn’t a big deal. Instead, comments suggesting that “recent volatility in commodity prices may impact confidence and the pace of contract awards” among its fossil fuel customers was the key takeaway from the release.

Dangerous days

While it doesn’t necessarily indicate an imminent market downturn, the company’s failure to announce any new contracts in 2019 has hardly boosted investor confidence in the stock. Investors will be glued to full-year results scheduled for March 20 for signs of progress on the contract front.

Right now, City analysts expect Wood Group to report a 16% earnings rise in 2019 and to follow this with a 30% increase in 2020. However, given the unpredictable outlook for oil prices as China’s economy slows and global production rises, issues that threaten to swamp the market in excess crude in the short-term and beyond, I reckon these figures could be painfully downgraded in the months ahead.

A better bet

So I say ignore its low valuation, a forward P/E ratio of 10.9 times, as well as its giant corresponding 5.3% dividend yield. There’s plenty of other great shares with inflation-bashing yields on the Footsie that I’d much rather buy today, like Paddy Power Betfair (LSE: PPB), to cite just one example.

The betting giant isn’t having the best of things right now. Revenues at its Betfair Exchange have taken a whack more recently because of the impact of intense competition in the horseracing segment. It’s also having some problems in the US, firstly from a rising costs across the Atlantic, but more recently from changes to gaming regulations there that could hit future profits growth. It’s why its share price has fallen 15% over the past six months alone.

And City analysts expect Paddy Power to remain under the cosh for most of 2019, reflected in consensus predictions that earnings will slide 12% this year. These near-term troubles don’t faze me, though. I’m confident its strong market position in gambling markets across the world still presents ample opportunity to create brilliant profits in the years ahead. The acquisition of Georgian online giant Adjarabet this month bolstered its international operations still further.

Its forward P/E ratio of 18.9 times fairly reflects the firm’s great long-term outlook, in my opinion, and a fat corresponding dividend yield of 3.1% adds an extra little sweetener. I reckon Paddy Power is a top FTSE 100 share to load up on today.

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