The Motley Fool

Forget a Cash ISA! I’d buy these 2 dirt-cheap FTSE 100 dividend growth stocks today

Image source: Getty Images.

While Cash ISA interest rates may have improved in the last year, it is still challenging to obtain an income return that is greater than 1.5%. By contrast, there are a number of FTSE 100 stocks that offer a higher income return, as well as the prospect of brisk dividend growth over the long run.

Furthermore, many large-cap shares appear to offer wide margins of safety. As such, now could be a good time to build a portfolio of FTSE 100 stocks, with these two companies worth buying today in my opinion.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...


Plumbing and heating specialist Ferguson (LSE: FERG) released a quarterly trading update on Monday, which showed that it continued to make progress during the period. Ongoing revenue increased by 6.2% to $5.27bn, with growth in the US being 8.4%. Its trading profit increased by 2.3% to $359m, with good cost control helping margins to rise slightly versus the same period of the previous year.

With a continued focus on customer service and investment in its core operations, the company seems to be well-placed to generate further growth over the medium term.

Although Ferguson has a dividend yield of just 3% at the present time, it has a good track record of dividend growth. For example, in the last four years it has delivered an annualised rise in dividends per share of 15%. Since shareholder payouts are currently covered 2.8 times by net profit, there seems to be further scope to raise dividends in future. With the company performing well from a business perspective, it could also generate impressive share price growth.

British American Tobacco

The ongoing changes within the tobacco industry are causing investors to shun British American Tobacco (LSE: BATS). The transition of smokers from tobacco products to less harmful alternatives such as e-cigarettes means that the industry may be less robust and resilient than it has been in previous years. However, it may also mean that there are growth opportunities ahead.

Since British American Tobacco has invested heavily in reduced-risk products, it appears to have a solid position in what is proving to be a fast-growing market. This could drive profitability higher, while the robust cash flow from tobacco could fund next-generation products, as well as dividend growth, over the medium term.

With dividends per share having grown at an annualised rate of 7% in the last four years, the company has a solid track record of rewarding its shareholders. Since it is due to post a rise in earnings of 9% this year, further dividend growth could be ahead. This could make its dividend yield of 7% even more appealing, while a price-to-earnings (P/E) ratio of 9.5 suggests that a wide margin of safety is on offer.

Therefore, for contrarian investors who are content to take a long-term outlook in return for improving income prospects, the company could be highly appealing.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Peter Stephens owns shares of British American Tobacco. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.