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2 FTSE 100 dividend shares I’d buy and hold for 20 years

Finding the sweet spot between FTSE 100 dividend shares worth holding for multiple decades and those that are overvalued is a tough ask for investors. But I think there are two companies that make perfect sense, especially in a Stocks and Shares ISA.

With the weak pound and Brexit uncertainty dragging markets down, there are some great buy and hold opportunities for solid, long-term companies at attractive valuations.

Don’t pick your bottom

We’re looking at companies that can continue to grow over the next 20 years. That means looking beyond Brexit, beyond a potential 2021 global recession, through self-driving cars, AI-powered drones delivering your Amazon parcels, and into a world that perhaps bears little resemblance to today.

When you’re seeking a bargain it can be seriously tempting to buy shares that are going down in price. There’s a reason why the warning “don’t try to catch a falling knife” is a truism. Buying shares that are on an upward trend is the right thing to do.

Ideally we want companies that lead their sector, have stable businesses with good profit margins but still have significant room to expand.

High energy

At time of writing, FTSE 100 energy infrastructure operator National Grid (LSE:NG) is offering a 5.5% dividend yield on a trailing price-to-earnings ratio of 19. It’s not suspiciously cheap, like the kind of fire-sale bargain Sirius Minerals became.

Bosses have been talking to shareholders about the investments they might make from 2021 to 2026. “We have a critical role in the rapid change in our energy systems during this period, reducing carbon emissions whilst maintaining highly reliable and resilient networks,” the board noted.

Electricity and gas reliability is above 99.99%, consistent with the best performing organisations in the world, and National Grid are rapidly ramping up the amount of renewables in the energy mix, which tells me this organisation is heading in the right direction.

Coal and gas only made up 46.6% of generation, down from 75.6% a decade ago, while fast-growing wind jumped to 18.8% of the mix from just 1.3% in 2009. These are milestones I’m happy to get behind.

Engineer a profit

It may be a controversial buy at first glance but the second of these FTSE 100 dividend shares I’d hold onto for the next two decades is Spirax-Sarco Engineering (LSE:SPX).

SPX only offers a 1.25% dividend, for goodness sake. And it’s the most expensive stock per share on the FTSE 100!

There are two compelling reasons why SPX is a great long-term hold. First, the business is a cash-generating machine. All that lovely free cash flow sloshing around means management is more likely to divest it to investors.

Second, over the last 10 years, dividends have grown by 11% a year and that growth is solid. If I’m buying and holding over the long term I want to make damn sure the company can really afford the dividends it’s paying out.

SPX has a long history of steady growth and I’m confident it can continue; the engineering firm has added to its earnings per share at a rate of 17% a year since 2014.

I think a stock split will make sense for SPX management over time. An £80 a share entry price is a barrier and bringing down that headline number will attract more liquidity to the shares.

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Tom has no position in 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.