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Forget a Cash ISA! I’d buy these 3 FTSE 100 dividend growth stocks right now

Cash ISAs pay terrible rates of interest so I’d rather aim to compound my money by investing on the stock market. Here are three FTSE 100 dividend-growing companies I’d head for first.

Medical devices

Smith & Nephew (LSE: SN) makes medical devices such as joint implants, instruments, bits and pieces used to stabilise fractures and items for advanced wound care among other things. Demand has been consistent and growing for years, which has led to a decent record of dividend growth. Over the past five years, the dividend has risen by around 34%.

At the beginning of May, the firm updated the market by saying it made a good start to the year and is “building momentum through broad-based organic growth and acquisitions.” Meanwhile, the recent share price close to 1,675p throws up a forward-looking price-to-earnings (P/E) rating of just under 20 for 2020 and the anticipated dividend yield is around 2%.

The valuation isn’t low, but I reckon Smith and Nephew’s steady, cash-generating characteristics justify a fuller rating. I’d be tempted to make the stock one of my core portfolio holdings.

Fast-moving consumer goods

Reckitt Benckiser Group (LSE: RB) manufactures health, hygiene and home products and owns brands such as Dettol, Durex, Nurofen, Scholl, Gaviscon, Finish and Calgon. Stable incoming cash flow tends to be a feature of the business and the dividend has risen around 26% over the past five years.

At the start of May, the firm said it had seen a slow start to the year, but expected improving growth during the second half of the year. Chief executive Rakesh Kapoor plans to retire at the end of 2019 and the company is looking for a successor. Kapoor has been at the helm for more than eight years and has spent more than three decades with the company overall. I’m a big fan of periodic change at the top in a firm because it can bring in renewed drive, determination and enthusiasm, which could help drive operations forward.

The recent share price of 6,405p puts the forward-looking P/E rating at around 17.5 for 2020 and the anticipated dividend yield is about 2.9%. I think the firm’s consistent cash flow justifies the full-looking valuation.

Smoking products

British American Tobacco (LSE: BATS) makes cigarettes, tobacco and next-generation products for smokers. The share price has been weak for a while and out of favour with investors but the dividends keep on coming.

Over the past five years, the dividend has risen around 37% and at today’s share price close to 2,872p the dividend yield runs near 7.5% for 2020. Meanwhile, the forward-looking P/E ratio for that year sits at 8.5 suggesting that the stock trades at a level representing decent value right now.

In April, the company said the business is in good shape despite investors’ concerns about possible regulation in the US and “competitor dynamics” in new product categories. The firm reckons the causes of those concerns “in fact present significant opportunities for future growth.” I think BATS looks like an attractive contrarian ‘buy’ right now.

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Kevin Godbold has no position in any share mentioned. 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.