The Motley Fool

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

Image source: Getty Images.

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.

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...

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.

“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!

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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.