The Motley Fool

Have £2,000 to invest in the FTSE 100? Here are 2 dividend shares I’d buy in an ISA today

While the FTSE 100’s dividend yield of 4.5% is highly appealing, it’s possible to generate a significantly higher return across a wide range of stocks.

A number of the index’s members are proving to be highly unpopular with investors at the present time. Although they may face an uncertain near-term outlook, they could deliver impressive income returns over the long run.

Sign up for FREE issues of The Motley Fool Collective. Do you want straightforward views on what’s happening with the stock market, direct to your inbox? Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio. Click here to get started now — it’s FREE!

With that in mind, here are two FTSE 100 shares that could offer an impressive dividend investing outlook. As such, they may be worth buying right now.

Severn Trent

Water and wastewater services company Severn Trent (LSE: SVT) released a trading update on Wednesday which showed it’s on track to meet guidance for the full year. Progress is being made in areas such as energy self-generation, as well as improving the customer experience.

Although utility stocks have historically offered defensive investing appeal, regulatory and political risks have contributed to weak investor sentiment in recent months. Severn Trent, for example, has recorded a share price decline of around 20% in the last three years. This trend may continue in the near term, with an uncertain operating environment having the potential to weigh on its future prospects.

Despite this, the company could offer long-term income investing appeal. It has a 5% dividend yield, which is historically high for the stock. Having a solid track record of dividend growth, as well as a relatively attractive price-to-earnings (P/E) ratio of 14, it may provide inflation-beating income returns over the long run.


Having declined by around 40% in the last year, Sainsbury’s (LSE: SBRY) now appears to offer a wide margin of safety. Clearly, the company has experienced an uncertain period. Its failure to merge with Asda seems to have significantly disappointed investors, while its strategy and management team have come under pressure from a range of investors in recent months.

However, the valuation of the stock could present an investment opportunity. Currently, it trades on a P/E ratio of just 9. This suggests investors may have priced in the risks faced by the business in what is a challenging wider retail sector. As well as weak consumer confidence and an increasing shift to e-commerce sales, Sainsbury’s also faces a high level of competition from no-frills operators such as Aldi and Lidl.

While these threats could hold back its share price in the near term, its long-term income prospects could be appealing. It currently yields 5.7% from a dividend that’s covered 1.9 times by net profit.

With net profit forecast to grow by 4% in the current year, it’s clearly not the fastest-growing stock in the FTSE 100. But, equally, its prospects may be more attractive than the stock market is currently pricing in. This could present a good buying opportunity for long-term investors.

You Really Could Make A Million

Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, "10 Steps To Making A Million In The Market".

The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide. Simply click here for your free copy.

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.