With the best flexible Cash ISA on the market at the moment offering an interest rate of just 1.36%, I think investors should overlook these tax-free savings accounts and put their money in dividend stocks instead. One of the FTSE 100’s top dividend stocks, in my view, is RSA Insurance (LSE: RSA).
A provider of personal, commercial and speciality insurance products, RSA is often overlooked as an income play because it’s a relatively complex enterprise. Indeed, while RSA is one of the largest insurers in the country, it isn’t a household name. What’s more, insurance businesses are quite tricky to understand, which can put investors off.
Still, when it comes to income, RSA is unlikely to let you down. Over the past five years, the company has hiked its dividend payout from 2p per share in 2014 to 21p for 2018. Analysts are expecting further growth in 2019. The City has pencilled in a total potential distribution of 24p for 2019 as a whole, rising to 29p for 2020. These forecasts imply shares in RSA will yield 5.1% next year.
On top of RSA’s market-beating dividend yield, the stock also appears to offer value at current levels. Analysts are expecting two years of explosive earnings growth for the firm. They have RSA reporting earnings per share of 40p for 2019, rising to 47p for 2020. These projections put the stock on a forward P/E of 12.
This valuation, coupled with RSA’s market-beating dividend yield suggests to me you can depend on this income stock for the long term.
Another FTSE 100 share that could offer an improving dividend outlook is WM Morrison Supermarkets (LSE: MRW).
The retailer has adopted a conservative approach to dividends in recent years, and are now covered 1.4 times by net profit. This suggests increasing shareholder payouts may be ahead, as the business continues to invest in its online and offline growth.
At the beginning of September, the company reported earnings growth across the business even as a vital underlying sales growth figure nearly stalled amid waning consumer confidence. However, Morrison’s has been able to grow its online business and management is planning further investment here over the next year.
Morrison’s is expanding its same-day grocery delivery service with Amazon, which is available in Leeds, Manchester, Birmingham and parts of London, to other cities across the UK over the next few years.
With Morrison’s trading on a price-to-earnings (P/E) ratio of 14.7, it seems to offer excellent value for money even after its shares have made gains in recent months. The stock also offers a dividend yield of 5% at the time of writing.
It could become increasingly popular among investors due to its growth potential, as well as its defensive characteristics as a food retailer, in what could prove to be an uncertain period for the world and UK economy.
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Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. 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.