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Two ‘high-yield’ FTSE 100 dividend stocks I’d buy for an ISA today

It’s a great time to be an income investor at the moment, as right now, there are a large number of stocks within the FTSE 100 that offer dividend yields over 5%. Indeed, just recently my colleague Alan Oscroft commented that we’re currently enjoying the best time for top-quality dividend bargains that he’s ever experienced in his investing career and he’s been investing for a long time.

With that in mind, here’s a look at two high-yield FTSE 100 stocks that I’d be happy to buy for an ISA today. Both offer yields above 5%. 

BP

Oil major BP (LSE: BP) currently offers a prospective dividend yield of 5.6% – which is certainly attractive in today’s low-interest-rate environment – and its dividend payout looks sustainable, in my view.

The reason I say this is that BP’s break-even oil price – the price needed to cover capital expenditure and dividends – is currently around $46 according to JP Morgan estimates and that’s way below the current price of oil. Furthermore, the oil giant is looking to drive this number down to around $35 to $40 in the years ahead, which should provide even more dividend safety.

One reason I’d buy BP shares today is that the company could offer an element of protection from Brexit. If the UK did experience an economic downturn as a result of our EU exit, BP most likely wouldn’t be too badly affected as the group has operations in 70 countries around the world. Moreover, a fall in the value of the pound would actually boost the dividend for UK shareholders.

BP shares currently trade on a forward P/E of 13.5, which looks like a reasonable valuation to me.

Aviva

Another FTSE 100 high-yielder I’d be happy to pick up today is Aviva (LSE: AV). It currently offers a prospective yield of a massive 7.9% – around seven times the average Cash ISA rate.

Sometimes, you have to be careful when a dividend yield is that high, as it can signal that there is trouble ahead. Yet with Aviva, I’m not seeing any red flags at present and the company just hiked its full-year dividend by over 9%, which suggests that management is confident about the future.

It’s worth noting that Aviva did recently announce a change in its dividend policy. The insurer’s previous policy was to pay out 55% to 60% of operating earnings per share as dividends, however, it will now switch to a ‘progressive’ dividend policy which will see the dividend maintained or grown over time depending on business performance and growth prospects. While analysts have downgraded their dividend forecasts for this year and next over the last month, hikes of 9% and 6% are still expected currently.

Aviva has now notched up five consecutive dividend increases and in my view, it’s likely that the group will be keen to continue building up its dividend growth track record, while also paying down debt, in order to improve its reputation within the investment community. With the shares trading on a rock-bottom forward P/E of just 6.7, I see a lot of value here right now.

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Edward Sheldon owns shares in Aviva. 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.