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2 dividend stocks I’d buy for an ISA today

There are now less than three weeks to this year’s ISA deadline of 5 April. So today I want to look at two dividend stocks I’d be happy to buy today and tuck away for the future in a tax-free stocks and shares ISA.

A future-proof business?

Oil and mining companies have come in for a lot of criticism recently, due to the environmental impact of their activities. But I think there are still some attractive long-term opportunities in this sector.

For example, while the market for coal will (hopefully) start to shrink in my lifetime, I expect demand for copper to continue to increase. In an increasingly electrified world, demand for copper seems likely to continue growing.

That’s certainly the view of Iván Arriagada, chief executive of FTSE 100 copper miner Antofagasta (LSE: ANTO). On Tuesday Mr Arriagada said that he expects “the fundamentals of the copper market will remain positive” in 2019. He believes “the supply deficit will increase” during the year.

If Mr Arriagada is right, then copper prices could rise further this year as demand falls short of supply.

Strong numbers

Chilean firm Antofagasta could be a big winner if that happens. Figures published today show that the group’s earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 13.9% to $2,228m last year. This decline was mainly due to higher costs and a lower average copper sale price.

However, Antofagasta remains a highly profitable company. Today’s numbers show an operating profit margin of 29%. Management has  also confirmed that copper production is expected to rise from 717,600 tonnes to between 750,000 and 790,000 tonnes in 2019. Higher copper prices could provide a big boost to the group’s profits.

Antofagasta’s shares rarely look cheap. But I think the group’s profitability and strong cash generation justify a strong price tag. At the time of writing, the stock trades on 18 times forecast earnings for 2019, with a 2.4% dividend yield. I’d be happy to buy at this level for a long-term portfolio.

One pharma stock I’d buy

I have mixed feelings about some of the big pharmaceutical firms at the moment. But one medical stock that is on my buy list is FTSE 250 firm Hikma Pharmaceuticals (LSE: HIK).

Hikma specialises in producing generic versions of popular medicines. These are sold as cheaper alternatives to branded products whose patent protection has expired.

The group’s revenue rose by 7% to $2,076m last year, while underlying operating profit rose by 19% to $460m. Shareholders received a 12% dividend increase, maintaining the company’s track record of market-beating income growth.

Although profit margins on generic treatments are not always as high as on patent-protected newer medicines, Hikma’s approach does have some benefits. The group takes less risk on research and development and is able to sell its products into large, mature markets, where demand is already strong.

In my view, now could be a good time for investors to get on board at Hikma. New chief executive Sigurdur Olafsson is keen to find new routes to growth. Debt levels are low and the stock’s valuation on 16 times 2019 forecast earnings seems reasonable to me.

Although the dividend yield of 1.8% is quite modest, the payout has risen by an average of 13% per year since 2013. I view the shares as a long-term buy for dividend growth.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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.