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Forget a Cash ISA! I’d buy these 2 bargain FTSE 100 dividend growth stocks right now

While Cash ISA interest rates have risen in the last couple of years, it is still difficult to obtain an income return above 1.5% at the present time. With inflation being around 2% over the long run, this means there is a good chance that savers using a Cash ISA will see the value of their capital decline in real terms.

As such, instead of saving through a Cash ISA, buying FTSE 100 dividend stocks with bright income investing outlooks could be a better idea. Although they may come with the risk of capital loss, their superior income prospects may make their risk/reward ratios more enticing for long-term investors.

With that in mind, here are two FTSE 100 stocks that appear to offer impressive income investing outlooks.

Smurfit Kappa

Packaging specialist Smurfit Kappa (LSE: SKG) has made a strong start to its financial year, according to its most recent investor update. The company is focused on delivering further efficiencies that could improve its competitive advantage versus its peers, while also expanding its geographic reach. This could help to reduce the risks that the company faces from localised economic and political uncertainty.

With the company currently having a dividend yield of around 4.3%, its income returns are almost three times higher than those of a Cash ISA. Furthermore, with dividends being covered around 2.7 times by profit, there is scope for shareholder payouts to increase at a rapid rate over the medium term without hurting the financial strength of the business.

Since Smurfit Kappa trades on a forward price-to-earnings (P/E) ratio of around 8, it seems to offer a wide margin of safety. As such, now could be the right time to buy it.


Global investment manager Schroders (LSE: SDR) also appears to offer an impressive income investing outlook. In the short run, the wider asset management sector could experience a challenging period. Uncertainty surrounding political and economic issues, such as a US/China trade war and Brexit, may weigh on the performance of a wide range of asset prices.

However, with the company’s shares trading on a P/E ratio of around 12.5, they seem to offer a margin of safety. Furthermore, a dividend yield of over 4% suggests that the stock has income investing appeal following an annualised rise in dividends of 10% over the last four years.

With Schroders having dividend cover of two and being forecast to post a rise in earnings of 5% this year, its income investing outlook appears to be positive relative to many of its index peers. Its focus on developing a wealth management opportunity that provides greater access to private clients could act as a catalyst on its financial performance at what is a time of change for the wider industry. Therefore, buying its shares with a long-term view could be a shrewd move at the present time.

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Peter Stephens has no position in any of the shares 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.