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Have £1,000 to invest in FTSE 100 stocks? Here are 2 dividend shares I’d buy in an ISA today

With the FTSE 100 currently yielding around 4.25%, it is possible for income investors to generate an inflation-beating dividend return over the long run.

Of course, a number of the FTSE 100’s members offer significantly higher income returns than the index.

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With that in mind, here are two higher-yielding shares which could be worth buying in an ISA today. Both companies appear to have dividend growth potential, as well as offering the prospect of capital growth over the long run.


The long-term growth prospects for BP (LSE: BP) seem to be improving. The company’s recent update showed that oil and gas production increased by 4%, while four Upstream projects commenced production in the first half of the current year. It has also taken final investment decisions on multiple projects that could catalyse its future financial performance.

Indeed, the company continues to invest in new projects which could boost its financial performance in the long run. They include a growing low-carbon business which may become increasingly important to the company’s future prospects as environmental concerns remain a key focus for consumers across the globe.

With a dividend yield of 6.2% which is covered 1.5 times by net profit, BP’s income prospects appear to be encouraging. Certainly, fears regarding the world economy’s growth rate could lead to a depressed oil price which hurts the company’s profitability in the near term. But with continued investment in its operations, the business seems to be in a strong position to deliver profit and dividend growth over the long run that enables it to outperform the FTSE 100.

United Utilities

Another FTSE 100 company which may face an uncertain near-term outlook is water services business United Utilities (LSE: UU). Regulatory and political risks may mean that investors continue to demand a margin of safety, with the company currently having a dividend yield of around 5.2%.

This is a relatively high yield for the stock when compared to its historical range. It suggests that investors are somewhat cautious about its future prospects at a time when its operating environment may be subject to significant change. It also means that the stock may offer good value for money relative to its historic price levels.

Looking ahead, United Utilities continues to target dividend growth which at least matches RPI inflation through to 2020. Although it faces a period of potential regulatory and political change, the stock’s defensive business model may hold some appeal for investors at a time when there are fears surrounding the outlook for the world economy.

As such, the company could offer long-term income investing potential. Trading on a price-to-earnings (P/E) ratio of 14, it seems to offer good value for money compared to its historic rating range. Therefore, its total returns may prove to be relatively appealing for income-seeking investors at the present time.

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Peter Stephens owns shares of BP. 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.