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The easyJet share price is a FTSE 100 dividend opportunity I’d buy for my ISA today

The disappointing share price performance of budget airline easyJet (LSE: EZJ) in 2019 could produce an income investing opportunity for the long term. The company’s shares have moved 8% lower since the start of the year, with its update on Friday suggesting that trading conditions will be tough in the remainder of the year.

Despite this, the stock could outperform the FTSE 100 over the long run as a result of its growth potential and low valuation. Alongside another blue-chip stock that offers the prospect of a rising dividend, it could be worth buying within a Stocks and Shares ISA.

Turnaround potential

The large-cap stock in question is Imperial Brands (LSE: IMB). Along with a number of other tobacco companies, investors have become increasingly cautious about its financial prospects. Regulatory change is a major threat facing the business, while an increasingly health-conscious consumer could mean that cigarette volumes continue to come under pressure.

However, the company’s investment in e-cigarettes and other next-generation products could offset falling cigarette volumes. Furthermore, price rises on cigarettes could mean that the company’s revenue and profit growth remain robust over the long run.

With Imperial Brands having a dividend yield of 9.5% from a payout that is covered 1.4 times by profit, its income investing outlook remains highly appealing. While regulatory uncertainty may remain high, and investor sentiment could continue to be weak as the company moves ahead with its investment in next-generation products, its long-term recovery potential appears to be highly attractive. As such, now could be a good time to buy it from income and value investing perspectives.

Income opportunity

While the easyJet share price may have come under pressure in recent months, the company’s update suggested that its business performance has been robust. For example, passenger numbers for the first six months of the year increased by 13.3% to 41.6m, while its total revenue rose by 7.3% to £2,343m. As such, its results were in line with expectations, with the company focusing on its costs in order to become increasingly efficient.

Although consumer confidence may be weak and costs could rise due to a higher oil price, the company is forecast to post a rise in earnings of 18% in the current year. Since it trades on a price-to-earnings growth (PEG) ratio of just 0.6, the company could offer capital growth potential.

Furthermore, easyJet’s dividend yield now stands at 6.9%. With it being covered twice by profit, it appears to be highly sustainable. While there is scope for volatile earnings performance due to the cyclicality of the industry and the challenges it is facing, the company has a solid track record of growth. This suggests that investors with a long-term outlook could benefit from buying the stock while it trades on a low valuation, with its income potential being highly enticing relative to the wider FTSE 100.

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Peter Stephens owns shares of easyJet and Imperial Brands. The Motley Fool UK has recommended Imperial Brands. 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.