The Motley Fool

£10k to invest? I’d buy these FTSE 100 dividend stocks yielding 6%!

Image source: Getty Images

If you’ve £10,000 to invest in income stocks and don’t know where to start, I highly recommend taking a closer look at global mining giant BHP (LSE: BHP).

What I love about BHP is that, after around five years of restructuring and cutting costs, it’s now spitting out cash at an impressive rate. For example, according to the company’s numbers for its financial year ended 30 June, net operating cash flow came in at an impressive $17.4bn.

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...

Free cash flow, which what’s left for shareholders after things like capital spending, was $10bn (around £8.2bn). That’s compared to BHP’s current market capitalisation of £85bn.

This cash generation, coupled with the fact the mining group’s net debt has declined from around $27bn in 2016 to $9.2bn today, allowed management to declare a record final dividend totalling $1.3bn for the year.

Cash flow giant

As long as BHP continues to do what it does best (pull rocks out the ground) and doesn’t get sidetracked by any costly expansion plans, I reckon it’s highly likely the company will continue to throw off cash for many years to come.

City analysts believe the stock with yield 7% this year and also 6.2% next year, although these figures are based on regular dividends. As the company demonstrated earlier this year, it’s not averse to paying out special dividends when the time is right, so the actual level of income declared could be higher. That’s why I think this stock is worth a place in your portfolio today.

Cheap income

I’m also excited by BHP peer Rio Tinto’s (LSE: RIO) cash generation. City analysts currently believe this iron ore miner will report earnings growth of 43% for 2019 off the back of high iron ore prices and better margins. They’ve pencilled in earnings per share of $6.50 for the year, compared to $4.60 for 2018.

Rio could return almost all of this to investors, the City reckons. With a relatively clean balance sheet (net gearing of 12%) and limited capital spending demands, Rio can afford to return as much as $4.60 to shareholders in 2019, according to the City’s spreadsheets. That gives a dividend yield of 9.2% on the current share price.

Unfortunately, analysts reckon earnings will slide in the following year. Nevertheless, even with a 14% decline in earnings per share projected, the City community still believes the company will be able to payout $3.70 per share to investors via dividends next year. That gives a dividend yield of 7.5% on the current price.

These projections are highly attractive and adding to the appeal is Rio’s current valuation. At the time of writing, the stock is trading at a forward P/E of just 7.6. So, not only does this mining stock offer an attractive level of income, but it’s also dirt cheap as well.

“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!

Rupert Hargreaves owns no share 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.

Our 6 'Best Buys Now' Shares

The renowned 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 enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.