Today, I want to provide readers with insight into the trades that I have made for my own personal portfolio recently. Here’s a look at the two FTSE 100 dividend stocks I have bought in the last few months.
I originally added Hargreaves Lansdown (LSE: HL) shares to my portfolio back in late October after they crashed during October’s equity market sell-off. Yet when the stock took another dive early this year, I stepped in to buy another parcel of shares in mid-February at a share price of 1,670p.
Now, the dividend yield on Hargreaves Lansdown shares is not that high. With analysts expecting a dividend payout of 40.6p per share for this financial year, the prospective yield on my purchase price was only 2.4%. So, why would I go for a dividend stock with such a low yield?
Well, to my mind, the long-term growth story that Hargreaves Lansdown offers is immense. Britons desperately need to save and invest more for retirement, and as the market leader in the investment platform space here in the UK, Hargreaves looks very well placed to capitalise. As such, I think the stock has the potential for significant dividend growth in the years ahead.
Over the last three years, Hargreaves’ ordinary dividend has grown at an annualised growth rate of 14.2% (there have also been special dividends). And looking ahead, I see no reason why the group couldn’t continue increasing its dividend by at least 5% to 10% per year, as it continues to attract investors’ savings and equity markets rise over time. That means that if I’m still holding the stock in 20-25 years’ time when I retire, the yield on my purchase price could be 10% to 15%.
The shares have done well since my mid-February purchase, recently surging back above 2,200p. At that price, I’m going to hold off on adding more to my portfolio. Yet if we see another share price dip in the near future, I’ll definitely consider buying more shares here.
I’ve also taken advantage of price weakness to buy shares in consumer goods champion Reckitt Benckiser (LSE: RB) recently. I originally added this FTSE 100 stock to my portfolio in late December at a price of 5,875p, and then added more this month at 6,009p after the shares pulled back on news that healthcare company Indivior – which Reckitt used to own – had illegally boosted prescriptions for its blockbuster opioid addiction treatment. Analysts at Barclays have said that they think it’s unlikely RB will face criminal charges over this.
Reckitt is also not a high-yielding dividend stock. With analysts pencilling in a dividend payout of 174.4p per share for FY2019, the yield on my most-recent purchase price is around 2.9%. Yet dividend coverage here is solid at around two times, and RB has an excellent track record of increasing its payout (it’s up 25% over the last five years). With demand for its products such as Nurofen painkillers and Dettol cleaning goods likely to remain robust in the years ahead, I am expecting further dividend growth going forward.
Like Hargreaves, this is a dividend stock I plan to hold for the long term. So, I’m expecting that by the time I retire, the yield on my purchase price will be a lot higher than the yield on the stock today.
If you’re looking to supplement your salary or pension with regular dividends, then this special free investing report could be a great place to start! ‘A Top Income Share From The Motley Fool UK’ profiles a company that you’re bound to have heard of … but what you may have overlooked is the current near-6% yield on offer that our Motley Fool analyst believes is “comfortably covered by profits and by the firm’s cash flow”. Click here to claim your free copy now!
Edward Sheldon owns shares in Hargreaves Lansdown and Reckitt Benckiser. The Motley Fool UK has recommended Hargreaves Lansdown. 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.