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2 cheap FTSE 100 dividend stocks I’d buy and hold forever

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Even though the FTSE 100 has enjoyed a decade-long bull market, now could be a good time to buy dividend shares. There are a wide range of FTSE 100 stocks that have high yields, as well as dividend growth potential. Those same shares could also offer wide margins of safety, which may mean that they have capital growth potential for the long run.

With that in mind, here are two FTSE 100 dividend shares that could be worth buying today and holding over the long-term.

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Micro Focus

It’s been a rollercoaster ride for investors in Micro Focus (LSE: MCRO) over the last few years. The company experienced financial difficulties, as well as a change in management team, but now seems to be making encouraging progress in delivering on its revised strategy.

In the current year it is forecast to post a rise in earnings of around 5%. While not the highest growth rate in the FTSE 100, it represents a marked improvement from its recent financial performance. It means that its dividend may be becoming increasingly sustainable, with it currently covered 1.9 times by profit.

Since Micro Focus has a dividend yield of around 4%, it could deliver an impressive income return. Although its shares have become increasingly popular among investors this year, having risen 38% in 2019, it still trades on a price-to-earnings (P/E) ratio of 12.8. This suggests that alongside its income prospects, it could also offer capital growth potential as a result of an upward re-rating as its bottom-line growth improves.

Berkeley Group

The London property market’s performance in the last couple of years has provided a headwind for prime property developer Berkeley Group (LSE: BKG). As a result, its bottom line is expected to fall in the current year and next year, with this seeming to have impacted investor sentiment towards the company. In fact, its shares have fallen by 7% in the last year.

In the long run, the housebuilder seems to have a solid position within what could prove to be a strong growth market. The London property market has always moved in cycles, and there could be buying opportunities while it trades at a low ebb. Since Berkeley’s shares currently have a P/E ratio of 11.7 using next year’s earnings figure, they appear to offer good value for money relative to the wider FTSE 100.

Berkeley has a generous dividend outlook, with its return of capital expected to continue as per its long-term strategy. This means that it could have an annual dividend yield of as much as 5.3%, depending on whether it uses excess capital for dividends or share buybacks.

Therefore, while a relatively unpopular share that could struggle in the short run as the London property market experiences lower demand, it could offer long-term income and value investing potential. As such, now could be the right time to buy a slice of it.

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Peter Stephens owns shares of Berkeley Group Holdings and Micro Focus. The Motley Fool UK has recommended Micro Focus. 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.

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