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Forget BT and its 8% yield! I’d rather buy this FTSE 100 dividend stock for my ISA

It’s a great time to go dividend hunting with UK plc right about now. Shareholder payouts on these shores have recently hit all-time peaks and the current average yield on offer from the FTSE 100 sits just shy of 5%. Compare that with the pathetic returns on offer from Cash ISAs (where interest rates sit at around 1.5%) or the fast-diminishing profits that buy-to-let investors currently make.

However, some of the probable dividends that Britain’s blue-chips offer pale in comparison to what City analysts are expecting from BT Group (LSE: BT-A). Sure, the full-year payout is expected to remain unchanged again at 15.4p per share for the current financial period (to March 2020), but such a projection still yields a jaw-dropping 7.9%.

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Risky business

Regular readers will know that I’m not prepared to countenance buying shares in the telecoms giant myself. A combination of falling revenues and mounting capital expenditure has raised the chances of a dividend cut in the near term, I’ve recently argued.

And recent data from Enders Analysis has added to my bearish take, the researcher stating that “market revenue growth fell in quarter three to below 1%”. It added that growth “may drop below zero next quarter as existing customer pricing comes under more pressure.” It said pricing for new customers is rising and should continue doing so as the demand and availability of ultrafast broadband rises, though this isn’t enough to soothe my current fears. This is why I’m happy to keep ignoring BT’s jumbo yield and its low rating (a forward P/E ratio of 8.2 times).

A better buy!

BT’s share price dropped 20% in the last calendar year, and it has fallen by almost half over the past three years as the bottom line has looked weak and on speculation over a possible cut to the dividend. And as we sit here at the start of 2020, there’s no clear reason to expect these concerns to lessen and the company’s share value to break out of its tailspin.

I’d much rather buy shares in Polymetal International (LSE: POLY), another FTSE 100 firm that boomed 46% in value in 2019. This is a business that looks set to keep rising as a combination of rock-bottom global interest rates, fears over the world economy, plus geopolitical issues like Brexit and tense trade talks keep gold prices on the up-and-up.

The boffins at UBS certainly believe safe-haven demand for the yellow metal should remain robust in 2020. Under their base scenario, they expect that prices will subsequently end the year at $1,635 per ounce — up from current levels around $1,515 — and for it to remain strong and even end 2021 at $1,650.

Polymetal’s 4.9% yield might not be as big as BT’s, while a forward P/E ratio of 10.2 times also isn’t as impressive. Still, these are hugely-attractive values and, unlike the telecoms play, it’s likely that it will experience another year of heady share price gains in 2020. It’s a cast-iron ‘buy’ in my opinion.

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Royston Wild 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.