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3 reasons I’d buy FTSE 100 dividend shares today

The FTSE 100’s performance in recent months may not have been especially impressive. It has delivered a volatile performance that has shown investors are currently uncertain about the future for the world economy.

This trend may continue in the near term, but history suggests that the income returns currently on offer from FTSE 100 dividend stocks could be highly impressive. Furthermore, the index has a strong track record of delivering long-term growth. And, with other assets offering relatively unfavourable returns, now could be the right time to buy large-cap shares.

Income return

The FTSE 100 currently has a dividend yield of 4.4%. That’s above its long-term average and suggests that the index offers good value for money at the present time. This could mean that many of its members trade on wide margins of safety that may lead to strong growth for shareholders over the long run.

Buying undervalued shares can favourably position an investor for long-term growth. Since the FTSE 100 generates a large proportion of its income from non-UK markets, it may be able to capitalise on the improving growth forecasts for the world economy. Therefore, while it trades on a low valuation and offers a high income return, now may be the right time to buy a diverse range of stocks.

Track record

The track record of the FTSE 100 in recent years may be rather lacklustre. However, its performance over the long run has been highly impressive. In fact, since it was created in 1984, the index has returned around 9% per annum when dividends are included.

As a cyclical asset, the FTSE 100 experiences periods of growth and periods of less favourable returns. Recent years have been more akin to the latter, but history shows that neither period lasts in perpetuity. Therefore, buying FTSE 100 shares after they have experienced disappointing levels of growth could mean that an investor will go on to experience heightened levels of growth in the future.

Relative appeal

The FTSE 100 may also offer investment appeal at the present time due to the unfavourable returns that are available elsewhere. Investment-grade bonds, for example, offer a negative real-terms return in many cases. It’s the same situation with cash, while buy-to-let investors are currently facing rising tax bills due to legislation changes.

Therefore, the FTSE 100’s return potential could be significantly higher than that of other assets. For a long-term investor who is able to overcome potential paper losses and a period of volatility due to economic and political uncertainty across the world economy, now could be the right time to buy a range of large-cap shares while they trade on low valuations.

The index’s track record shows that a high-single-digit annualised return is very achievable, which could make a positive impact on your financial future.

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Peter Stephens has no position in any of 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.