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SSE isn’t the only cheap FTSE 100 dividend stock I’d buy for my Stocks and Shares ISA today

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The annual results released by SSE (LSE: SSE) on Wednesday highlighted the challenges that the company has experienced over the period. Profit was down, while the business continues to make major changes to its structure.

However, it continues to offer a high dividend yield. It also plans to pay a relatively appealing dividend over the medium term as part of a five-year plan. Alongside another high-yielding FTSE 100 share, therefore, it could offer an impressive income return in the long run.

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Income potential

The company in question is FTSE 100-listed housebuilder Persimmon (LSE: PSN). The stock has experienced a turbulent few years, with fears surrounding the outlook for the UK economy holding back investor sentiment towards the wider industry.

However, the performance of housebuilders has generally been positive. Demand for new homes has been resilient, with government policies such as Help to Buy and stamp duty and land tax relief helping to make new homes more affordable and accessible. Since those policies are set to remain in place at the same time as interest rate rises are forecast to be modest over the next few years, the prospects for the industry may be better than investors are currently pricing in.

With Persimmon having a dividend yield of over 11%, it offers a highly enticing income return. Since the business has a large net cash position, it seems to be in a good position to cope with potential challenges that may be ahead for the industry during Brexit.

Therefore, while investor sentiment may continue to be weak, as highlighted by the stock’s price-to-earnings (P/E) ratio of 7.3, it could offer an appealing income investing outlook. As such, now could be the right time to buy it for the long term.

Low valuation

As mentioned, SSE’s results were somewhat disappointing. Adjusted earnings per share declined by 32% to 67.1p, with results reflecting challenges in its Energy Portfolio Management (EPM) segment that had been previously forecast.

The company has appointed an Executive Chair of its Energy Services division, with the mandate to secure the best future for the business outside of SSE. This forms part of a revised strategy to focus on renewable energy, which could align the business with potential growth trends over the long run as renewables look set to become an increasingly important part of the energy mix.

With SSE paying a dividend of 80p per share for the current year, it has a dividend yield of 7.9%. Although the company faces political and regulatory risks, as well as the uncertainty that a restructuring can bring, its yield suggests that it offers a wide margin of safety.

Therefore, for investors who are seeking a high income return and who are able to overcome the prospect of an uncertain period for the business, it could offer investment appeal at the present time.

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Peter Stephens owns shares of Persimmon and SSE. The Motley Fool UK has no position in any of the shares mentioned. 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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