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£5k to invest? I think these 2 FTSE 100 dividend stocks could jump 20%

If you have £5,000, and you are looking for blue-chip FTSE 100 stocks to invest your hard-earned money in, I highly recommend taking a closer look at the world’s largest cruise ship company Carnival (LSE: CCL).

Shares in Carnival have fallen recently after the company warned on profits at the end of September. Rising fuel costs have impacted profit margins, and economic uncertainty is weighing on revenue growth.

As a result, management now expects the company to earn between $4.23 and $4.27 per share for 2019, down from its earlier forecast of $4.25 to $4.35 per share.

Strong brand

Carnival’s recent trading update is disappointing, but I’m optimistic that the company can recover over the next 12 to 24 months.

In my opinion, Carnival is well run and has plenty of scope for growth over the next 10 years as the global cruise industry continues to grow. The company has always had to deal with volatile fuel costs and economic uncertainty. However, it has still managed to grow earnings per share at a compound annual rate of around 26% over the past six years.

Put simply, I think the market is concentrating on the company’s short-term headwinds, and overlooking its long-term potential. That’s why I believe the shares could be a great addition to your portfolio after recent declines.

Carnival is currently dealing at a forward P/E of just 9.6, around 20% below its five-year average. On top of this, the stock current supports a market-beating dividend yield of 4.8% compared to the FTSE 100 average of 4.5%.

Recovery complete

As well as Carnival, I also reckon shares in insurance group RSA (LSE: RSA) could jump by 20% or more from current levels.

As I’ve explained before, during the past five years, RSA has been through one of the most intensive restructurings in its long history. It now looks as if the business is back on its feet. The City is projecting earnings per share growth of 26% for the company in 2019, followed by growth of 18% in 2020.

Based on these numbers, the stock is dealing at a forward P/E of 13 and PEG ratio of 0.73, indicating shares in RSA currently offer growth at a reasonable price.

For the past few years, shares in this international general insurer have changed hands for as much as 15 times forward earnings. A return to this level implies the stock could jump to 618p, up 16% from current levels.

As well as this capital growth potential, the stock supports a dividend yield of 4.8% (based on analyst estimates for 2019). When combined with the company’s potential for capital growth, this gives income investors a potential return of 20% or more over the next 12 to 24 months.

And I’m even more optimistic about RSA’s income potential from 2020 onwards.

Now that RSA’s recovery is almost complete, analysts are expecting the group to ramp up distributions to shareholders. The full-year payout is expected to expand by as much as 22% in 2019 and 18% in 2020.

If the firm meets these targets, the stock will offer a yield of as much a 5.6% by 2020. Dividend cover of 1.6 times by earnings per share leaves plenty of room for further growth from this level as well.

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Rupert Hargreaves owns shares in Carnival. The Motley Fool UK has recommended Carnival. 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.