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The FTSE 100 dividend shares I’d buy and hold forever

You only ever buy shares that you’d be prepared to hold forever? Yeah, right. That’s the ideal, but even Warren Buffett sometimes changes his mind and sells. And we lesser mortals just have to buy shares that we’re not 100% certain of, because we’re basically not as good as the best — well, I’m not, for sure.

But what if I were literally forced to switch off from the stock market for a full 10 years? Which shares would I buy ahead of that? I’ve recently described Royal Dutch Shell (LSE: RDSB) as my favourite stock right now, but here are the two I consider probably the safest in the FTSE 100.

Ubiquity

That just means it’s everywhere, and it’s a good way to describe Unilever (LSE: ULVR). It’s not the biggest dividend payer in the Footsie, but it’s surely one of the most reliable. Unilever has been providing yields of between 3% and 4% for years, and forecasts show more of the same.

Crucially, the dividends are well covered by earnings, with cover of 1.5 times on the cards for 2019. With the company’s reasonably predictable business, I think that’s easily good enough, and in fact provides some safety margin too.

Unilever’s safety comes from the wide range of essential goods it sells. We’re familiar here with brands like Dove, Lipton, Domestos, Marmite, Magnum… just do a web search for ‘Unilever brands’ and see what’s there.

Brands

But what many of us won’t realise is that Unilever is responsible for some of the biggest selling brands in almost every market around the world — brands we never see here are big in Asia, Africa, South America, Central Europe…

Is Unilever a company Warren Buffett would buy? As my colleague Roland Head has pointed out, he tried and failed back in 2017. Mr Buffett thought he saw weakness at the firm, and since then it has investigated and addressed those itself.

Yes, Unilever is one stock I really could buy and forget, and keep taking the dividends.

Insurance

I like the insurance sector, and currently hold Aviva for its whopping 8% dividends. But the market is spilt over Aviva, and it did come a cropper in the banking disaster — overstretched, it had to slash its dividends and work hard on shoring up its balance sheet.

That’s exactly what didn’t happen to Prudential (LSE: PRU), which sailed through the financial crunch like Lady Bracknell through a handbag crisis.

Again, we’re not looking at one of the biggest dividends in the FTSE 100, but the index’s weakness in recent years has helped push the Pru’s yield up with the rest. While we’re looking at a forecast index average of 4.7% for 2019, Prudential’s predicted dividends should yield 3.5% this year and 3.7% next, which is a nice boost on their long-term levels of around 2.5%.

Low risk

As far as safety goes, we’re looking at a recent record of earnings per share covering the dividend payment around three times.

What’s more, Prudential shares are on what I think is a very low P/E right now, of only 10 on 2019 forecasts and dropping to nine a year later. I can only assume the shares are pushed down by general weak sentiment towards the financial sector, especially as the Brexit farce continues daily.

Although I already own insurance shares, I have Prudential on my shortlist for a purchase too. 

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Alan Oscroft owns shares of Aviva. The Motley Fool UK owns shares of Unilever. 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.