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Yielding 4%+, I think the FTSE 100 offers bargain dividend stocks for your ISA

The FTSE 100’s performance since the start of 2019 may lead some investors to question whether it continues to offer good value for money. Certainly, it may be more expensive than it was just a few months ago, and many of its members may have narrower margins of safety as a result.

However, the 4%+ dividend yield that is on offer from the FTSE 100 suggests that it offers excellent value for money at the present time. It is towards the upper part of its historic range, while its long-term growth prospects continue to be bright despite possible threats in the short run.

Value for money

Investors looking to generate an inflation-beating yield that has the potential to rise at a brisk pace may find it within a diversified range of FTSE 100 stocks. As mentioned, the index appears to offer good value for money, with it trading only 5% higher than it did at the end of the last century. Although in 1999 it was in the midst of a bull market, the index has experienced a doubling of its price in the last decade. As such, investor sentiment appears to be robust, and this could allow its price level to move higher over the long term.

Dividend growth

As well as offering the potential for a high yield and good value for money, FTSE 100 stocks could also offer impressive dividend growth. The world economy continues to grow at a relatively strong rate, with major economies such as India and China forecast to produce high single-digit GDP growth over the next few years.

Certainly, there are risks facing the world economy. Notably, the trade war between the US and China has ramped up in recent weeks, and this could put pressure on the two economies. However, with the FTSE 100 offering a diverse range of companies that operate across a variety of regions, it may be possible for investors to seek stocks that could still offer impressive profit growth. This could translate into a rising dividend over the long run.

Relative appeal

With the FTSE 100 having the potential to generate a 4% income yield plus capital growth, its appeal versus other asset classes remains high. For example, Cash ISAs offer an interest rate of around 1.5%, while bond prices could be negatively impacted by rising interest rates. Similarly, property price growth has slowed since the EU referendum in many parts of the UK, while changes to tax rules make buy-to-let investing less appealing.

As such, FTSE 100 dividend stocks could offer an appealing means of generating an income over the long run when compared to other mainstream assets. The index may have performed well in recent months, but there could still be scope for significant growth in both dividend payouts and share prices across the various member stocks of the large-cap index.

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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.