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Have £1,000 to invest? 2 FTSE 100 dividend stocks I’d buy today

If you’ve got £1,000 to invest in shares, then you’ll need to be careful to avoid losing too much in transaction costs. In my opinion, you’ll also probably want to focus on stocks that look decent value and have the potential to deliver reliable income and capital gains.

For today’s article, I’ve been hunting through the FTSE 100 for the kind of stock I’d be happy to buy and hold with a £1,000 lump sum. The two companies I’ve found are profitable, pay attractive dividends, and form an essential part of modern economies. I reckon they’re worth a closer look.

Paper profits

The share price of FTSE 100 packaging group Mondi (LSE: MNDI) has risen by more than 300% since the firm’s flotation in 2007. The company has delivered a lot of value for shareholders, while expanding its operations through a mix of organic growth and acquisitions.

However, Mondi stock has come off the boil over the last year, as investors have started to price in the risk of an economic downturn. I accept this risk but, on the other hand, I think we need to recognise how essential this business is to modern life.

Packaging is an essential part of modern industry and commerce, especially online. Although I hope packaging will become more sustainable and efficient in the future, I believe demand is likely to continue to grow in most developed and emerging markets.

For this reason, I think the 20% fall we’ve seen in MNDI stock since last summer could be a decent opportunity to buy. At current levels, the shares are priced on 10.9 times 2019 forecast earnings and offer a dividend yield of 4%. I see that as an attractive valuation. Indeed, I would buy the shares myself, if I didn’t already own shares in another packaging company.

Rebooting the business

When banks and other large companies have IT problems, a common cause is that, behind the scenes, they are running very old systems. An industry has emerged that specialises in operating, supporting and developing older IT systems. One of the larger players in this sector is FTSE 100 firm Micro Focus International (LSE: MCRO).

Micro Focus shares have risen tenfold since the group’s flotation in 2005, as chairman Kevin Loosemore has guided the group through a series of acquisitions and growth opportunities.

Unfortunately Loosemore’s biggest deal to date, the 2017 acquisition of HP Enterprise’s software business, has caused serious indigestion. Things seem to be back on track now, but work is still underway to complete the integration, which has disrupted new sales.

Time to buy?

The market remains jittery about Micro Focus. So when the chairman cashed in £11.6m worth of stock last week, I wasn’t surprised to see the shares fall sharply. However, Loosemore still claims to have half his net worth invested in this company. And the results themselves were largely as expected, with revenue down slightly but profit margins and cash generation up.

I missed buying MCRO stock at the start of the year when I though it looked cheap. But after last week’s drop, the shares trade on less than 10 times forecast earnings and yield 5.5%. If the business can return to steady growth, I think the stock could command a much higher valuation. I’ve added the shares back to my buy list.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Micro Focus. 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.