If you like high yields, it’s a great time to be an investor right now. Incredibly, around a third of the stocks in the FTSE 100 offer yields of 5% or higher at present. With that in mind, here’s a look at two FTSE 100 dividend stocks I’d be happy to snap up this month.
From a long-term investing perspective, I continue to see a lot of appeal in the FTSE 100’s packaging companies due to the fundamental role that packaging plays in e-commerce. And DS Smith (LSE: SMDS) – which is a leading producer of customer-specific corrugated packaging – is my top pick in the sector.
DS Smith shares have been beaten down in the last 12 months on the back of concerns over global growth, falling from over 500p a year ago to around 315p today. However, I see this share price weakness as a buying opportunity because the company continues to advance. For example, in a recent trading update, the group told investors that the last financial year had been one of “substantial progress” and that it had seen ongoing growth in corrugated box volumes and market share gains.
DS Smith paid out 14.4p per share in dividends last year, and for the financial year just ended (30 April), analysts expect a 10% dividend hike which would take the payout to 15.8p. That pushes the yield up to a healthy 5%, which is a steal in today’s low-interest-rate environment, in my view. With the stock trading on an estimated P/E ratio of just 9.4, I think DS Smith offers top value right now.
Legal & General
I’m also seeing considerable value in one of my favourite FTSE 100 dividend stocks Legal & General Group (LSE: LGEN) at present. Its share price has experienced a 10% pullback over the last six weeks or so, which means a higher yield is on offer for investors. Currently, the prospective yield is a lofty 7%.
Legal & General has been a fantastic income stock over the last decade as the dividend payout has risen significantly. For FY2008, the dividend payout was just 4.06p per share, yet for FY2018 the company paid out 16.4p per share, which represents a stunning annualised growth rate of 15% over the 10-year period.
Looking ahead, I’m not expecting that level of dividend growth in the next few years, however, I think growth of 5%-7% is totally achievable for the financial services giant, given the company’s solid momentum, diversified business model, and healthy level of dividend coverage. Currently, analysts are forecasting dividend growth of 6.9% this year and 7.9% the year after.
After the recent share price pullback, Legal & General shares can be picked up on a forward P/E ratio of around 8. I see that ratio as too cheap. With a yield of around 7% on offer, I think now is the time to be accumulating the stock.
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Edward Sheldon owns shares in Legal & General Group and Ds Smith. The Motley Fool UK has recommended DS Smith. 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.