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Have £5k to invest in your ISA? A FTSE 100 dividend stock I’d buy today and hold for 10 years

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Market conditions might be challenging right now but that’s no excuse to dig yourself a foxhole and sit tight until the bloodshed is over. Failing to capitalise on dips in the market is a classic investment mistake. Indeed, following the recent sell-off across global stock bourses, there’s an enormous list of great stocks waiting to be gobbled up.

Take Hargreaves Lansdown (LSE: HL), a FTSE 100 share whose extreme share price fall over the past week leaves it a whisker away from hitting new five-month lows. And this makes it a great share to stash into your Stocks and Shares ISA.

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Despite this heavy selling activity the financial services giant still trades on a tall forward P/E ratio of 31.3 times. This is twice the level which the broader FTSE 100 average sits at, and some would argue leaves it vulnerable to more weakness in the days and weeks ahead.

I would argue this multiple is quite reasonable given Hargreaves’ considerable structural opportunities, ones which latest financials released last week illustrated perfectly. These showed customer numbers rocketed by an extra 133,000 in the year to June, a rise which helped assets under administration surge 8% to £99.3bn.

And, as a consequence, profits at the business rose an extra 5% in fiscal 2019 to £306m. It’s unlikely this trend will run out of steam any time soon.

Dividends have doubled!

Driven by fears over the pathetically-low State Pension, Britons are taking active control of their finances like never before and this is playing into the hands of Hargreaves as the UK’s largest direct-to-consumer investment specialist. 

Its bright earnings outlook should continue to be a boost for income investors. Ordinary dividends at Hargreaves have more than doubled during the past half a decade and more electrifying payout hikes could be just around the corner. Indeed, City analysts predict last year’s 42p per share reward will rise to 45.8p in the current period, a projection which yields an inflation-beating 2.5%.

There might be bigger yields out there, sure, but forget about this low-ish reading. The beauty of progressive payouts is the possibility of chubby yields further down the line and I reckon this particular blue-chip should deliver some terrific dividend cheques over the long term.

Fancy a 6% dividend yield?

If I can borrow your ear for a little longer, I’d love to talk for a minute about Bakkavor Group (LSE: BAKK), a stock which has lost more than a 10th of its value so far in August. These recent falls leave it trading on a forward P/E ratio of just 6.9 times and makes it another terrifically-priced dividend share to buy today.

The FTSE 250 firm may be experiencing tough conditions in the UK right now, but strong growth in the US and China (where like-for-like sales boomed 16% in 2018) is helping it to offset the worst of these problems. And the fresh food manufacturer is investing heavily to boost factory capacity in these regions to meet bulging demand now and in the future, and particularly so in fast-growing segments like the ‘food-to-go’ market.

So invest in Bakkavor today for titanic long-term returns, I say. And, in the meantime, a bulging 6.3% forward dividend yield helps to take the edge off a likely, and rare, annual profits dip for 2019.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

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